On April 30, 2009, Tilton Products purchased machinery for $88,000. The useful l

Question

On April 30, 2009, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $4,000 residual value. value: 4.00 points Refer to the information above. Assume that in its financial statements, Tilton Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in 2009 and 2010 will be: O $3,750 in 2009 and $11,000 in 2010 $5,750 in 2009 and $11,500 in 2010. $5,250 in 2009 and $10,500 in 2010. $11,000 in 2009 and $5,500 in 2010 value: 4.00 points Refer to the information above. Assume that in its financial statements, Tilton Products uses the 200%- declining-balance method and the half-year convention. Depreciation expense in 2009 and 2010 will be: $%11,000 in 2009 and $19,250 in 2010. $22,000 in 2009 and $19,250 in 2010. $22,000 in 2009 and $16,500 in 2010. $11,000 in 2009 and $22,000 in 2010.

Explanation / Answer

Q1 SLM AND HALF YEAR CONVENTION Purchase Value 88000 Less: Residual Value 4000 Net Depreciable Value 84000 Life 8 Depreciation PA 10500 Since Half year Convention is used; Acquisition shall be treated in the middle of the year Depreciation PA 10500 Acquisition in half Year: Depreciation should be half for 2009 5250 Deepreciation for 2010: 10500 (Full year Depreciation) Answer is: 5250 in 2009 and 10500 in 2010 Q2 DOUBLE DECLINING & HALF YEAR CON.: Life 8 Rate of Depreciation 1/Life Rate of Depreciation 1/8*2 Rate of Depreciation 25.00% Purchase Value 88000 Deprecition for 2009: (88000*25%)*1/2 11000 Book Value for 2010: Purchase Value 88000 Depreciation in 2009 11000 Book Value for 2010 77000 Rate of Depreciation 25% Depreciation in 2010 19250 (77000*25%) Answer is: 11000 in 2009 and 19250 in 2010

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