Tango Company purchase land and a building for $350,000. If the assets had been

Question

Tango Company purchase land and a building for $350,000. If the assets had been purchased separately, the company would have paid $170,000 for the land and $210,000 for the building. What amount should be recorded for the building?

A.            $210,000

B.            $199,000

C.            $193,421

D.            $188,901

37.          On January 1, 2011, Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information. The computer has a 5 year useful life, after which it will be worthless because it will be obsolete. How much depreciation expense should Ac Electronics record for the year ended December 31, 2012, using double-declining balance method?

A. $160,000

B. $40,000

C. $100,000

D. $96,000

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Part A:

You will have to use weighted average method to calculate the value of building to be reported

Weight of Building = 210000/(170000 + 210000)

Value of Building = Purchase Cost*Weight of Building = 350000*210000/(170000 + 210000) = 193421

Option C (193421) is the correct answer.

Part B:

Annual Depreciation = 400000/5 = 80000

Depreciation Rate as Per SLM = Annual Depreciation/Cost of the Machine*100 = 80000/400000*100 = 20%

Depreciation Rate as Per Double Declining Method = Depreciation Rate as Per SLM*2 = 40%

Depreciation for the Year 2011 = 400000*40% = 160000

Depreciation for the Year Ending 2012 = (400000 - 160000)*40% = 96000

Option D (96000) is the correct answer.

Thanks.

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