(2) Rains Company purchased equipment on January 1 at a list price of $125,000,
ID: 2523664 • Letter: #
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(2) Rains Company purchased equipment on January 1 at a list price of $125,000, with credit terms 2/10, n/30. Payment was made within the discount period. Rains paid $6,250 sales tax on the equipment, and paid installation charges of $2,200. Prior to installation, Rains paid $5,000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment? a. $131,250. b. $135,950. c. $138,450. d. $126,250. (3) A company purchased factory equipment on June 1, 2017, for $128,000. It is estimated that the equipment will have a $8,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2017, is a. $12,000. b. s7,000..I c. $6,000. d. $5,000. (4) Mitchell Corporation bought equipment on January 1, 2017. The equipment cost $300,000 and had an expected salvage value of $50,000. The life of the equipment was estimated to be 6 years. The book value of the equipment at the beginning of the third year would be a. $300,000. b. $250,000. e. $216,666. d. $83,333. (5) Machinery was purchased for $340,000 on January 1, 2017. Freight charges amounted to $14,000 and there was a cost of $40,000 for building a foundation and installing the machinery It is estimated that the machinery will have a $60,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2018, if the straight-line method of depreciation is used? a. $133,600. b. $66,800.Explanation / Answer
Total capitalized amount = $125,000 + $6,250 +$2,200 + $5000= $138,450
Book value at the beginning of 3rd year= 300,000 – 83,333= $216,666
Capitalized value of machine= $340,000+ $14,000 + $40,000 = $394,000
Estimated Salvage value = $60,000
Total amount to be depreciated = $394,000 - $60,000 = $334,000
Useful life of machine = 5 years
Depreciation amount for 2 years= $334,000 / 5 *2 = $133,600
Accumulated Depreciation A/c balance as on 31st Dec 2018 = $133,600
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