Flip Company purchased equipment on July 1, 2011 for $90,000. It is estimated th
ID: 2503358 • Letter: F
Question
Flip Company purchased equipment on July 1, 2011 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life.
Instructions
Answer the following independent questions.
1. Compute the amount of depreciation expense for the year ended December 31, 2011, using the straight-line method of depreciation.
2. If 14,000 units of product are produced in 2011 and 26,000 units are produced in 2012, what is the book value of the equipment at December 31, 2012? The company uses the units-of-activity depreciation method.
3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation
Explanation / Answer
depriciation rate = (90000-5000)/5
depriciation rate = 17000/year
amount of depriciation after half year = 17000/2 = 8500
book value = 90000 - (14000/100000)*85000 - (26000/100000)*85000
book value = 56000
l1 = 2*17000
l1 = 34000
l2 = ((85000-34000)/4)*2
l2 = 25500
last for half year =max(8500,(85000-59500)/6)
balance depriciation = 85000-34000-25500-8500
balance = 17000
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