NAME_ Accounting 280 Chapter 9 Quiz On April 8, 2018. Dreamland Park purchased a
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NAME_ Accounting 280 Chapter 9 Quiz On April 8, 2018. Dreamland Park purchased a ferris wheel for $300,000. The estimated life of the ferris wheel To years, with an estimated residual value of $60,000. The service life in terms of output is estimated at 30,000 hours of operation. Compute the depreciation on this ferris wheel in 2018 and 2019 using the following methods, 2018 2019 a Straight-line b 200%-declining-balance c 150 %-declining-balance Record the Journal Entry for the 2019 depreciation expense for all three above methods. 2018 General JournalExplanation / Answer
Answer = A) CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD Purchase Cost of Machine $ 3,00,000 Less: Salvage Value $ 60,000 Net Value for Depreciation $ 2,40,000 Usefule life of the Assets 10 years Depreciation per year = Value for Depreciation / 10 years = $ 24,000 Purchase value of the Machiene = $ 3,00,000 Depreciation for the year 2018 = $ 18000 X 9 months / 12 months= $ 18,000 Depreciation for the year 2019 = $ 24,000 Answer = B) CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD Purchase Cost of Machine $ 3,00,000 Useful Life = 10 years Depreciation per year = $ 30,000.00 (Purchase price / Useful life) Rate of Depreciation = Rate of Depreciation = (1 / 10 Years ) 0.10 or 10% (Depreication / Purchase price ) Double decline deprection rate = 10% * 2 = 20.0% Purchase Value of the Assets $ 3,00,000.00 Depreciation for the year 2018 @ 20% X 9/12 = $ 45,000.00 Closing balance for the year2018 $ 2,55,000.00 Opening Balance for the year 2019 = $ 2,55,000.00 Depreciation for the year 2019 @ 20% $ 51,000.00 Closing balance for the year2019 $ 2,04,000.00 Answer = C) CALCULATION OF THE DEPRECIATION AS PER 150% DECLINE METHOD Purchase Cost of Machine $ 3,00,000 Useful Life = 10 years Depreciation per year = $ 30,000.00 (Purchase price / Useful life) Rate of Depreciation = Rate of Depreciation = (1 / 10 Years ) 0.10 or 10% (Depreication / Purchase price ) 150% decline deprection rate = 10% * 1.5 = 15.0% Purchase Value of the Assets $ 3,00,000.00 Depreciation for the year 2018 @ 15% X 9/12 = $ 33,750.00 Closing balance for the year2018 $ 2,66,250.00 Opening Balance for the year 2019 = $ 2,66,250.00 Depreciation for the year 2019 @ 20% $ 39,938 Closing balance for the year2019 $ 2,26,312.50 Journal Entries Date Account Title and explanation Debit Credit Depreciation Expenses $24,000 2019 To Equipment $24,000 (To Record the Depreciation under SLM Method) Depreciation Expenses $51,000 2019 To Equipment $51,000 (To Record the Depreciation under Double decline Method) Depreciation Expenses $39,938 2019 To Equipment $39,938 (To Record the Depreciation under 150% decline Method)
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