B. Assuming a 5 year life, calculate the depreciation expense under straight lin

Question

B. Assuming a 5 year life, calculate the depreciation expense under straight line, sum of the years Digits and 150%declining balance. Very clearly lable themethod you applied for each answer.

Clearly and neatly show all your work for the problems. Clarity and neatness count in grading. PROBLEM ONE (50 points) Corkery, Inc. constructed a wine press for use in its wine making operations. Corkery borrowed $100,000 at 1 000 specifically to finance the construction. They also had si 000 000 in g%bonds outstanding and a $4,000,000 12% long-termi note outstanding. Construction of the press began on January 1, 2017 and was concluded on December 31, 2017. The following expenditures were made related to construction of the press. Date Expenditure 01/01/17 70,000 04/01/17 $ 45,000 05/01/17 50,000 10/01/17 $ 80,000 A. Calculate the value of the press as of December 31,2017. Clearly indicate the value that is your final answer.

Explanation / Answer

Part A

Value of press would be all expenditures plus the interest expenses specifically of the press.

Interest expenses would be 10% of $ 1,00,000 = $ 10,000 and all expendetures of $ 245,000. Thus of $ 255,000.

Other interest payments will be adjusted in the statement of income and expenditure. Also, the interest expenses incurred after Dec 31 will be adjusted in it.

Part 2

Depreciation under SLM = $ 255000 / 5 = $ 51000

Depreciation under 150% declining balance = $ 51000 x 1.50 = $ 76500

Sum of the year digit method = $ 255,000 / 15 x 5 = $ 85,000

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