Library Idaho State Unive Chapter 9 Handout.pdf ·· ? Cont ezto.mheducation.com/h

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Library Idaho State Unive Chapter 9 Handout.pdf ·· ? Cont ezto.mheducation.com/hm.tpx?-0.81405610016 connect. ACCOUNTING Se tinuing Case: Part 3 Questio CC9-1 Accounting for the Use and Disposal of Long-Lived Assets [LO 9-3, LO 9-5 The following information applies to the questions displayed below. Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of the year at a cost of $10,500. The estimated useful life was ?ve years and the residual value was $500. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production was year 1, 2.450 hours; year 2. 2,300 hours; year 3, 2,150 hours year 4, 2,100 hours; and year 5, 1,000 hours. References Section Break CC94 Accounting for the Use and Disposal Assets [LO 9-3, LO 9-5 value 166 points CC9-1 Part 1 Required Complete a

Explanation / Answer

Depreciation under Production Method

Depreciation Under Double-declining Balance Method

Note : if we give 40% as depreciation for the 5 th year, the residual value at the end will be $816, But really we need 500 (as given in the question)

What will you do?
What some people do is they will take the larger of straight line method or double declining balance method.
Under straight line method, depreciation will be 2000.
We cant take 2000 because beginning book value is only 1361.So what we will be taking is, we will take 861 as depreciation, which is obtained by 1361-500, inorder to make the asset value equal to 500, which is residual value.

If you need any explanation or clarification, Please let me know.

Thank You!

Year Depreciation Accumulated Depre. Book Value Working Note At Aquisition 10500 Year 1 2450 2450 8050 (10500-500) x 2450 / 10000 Year 2 2300 4750 5750 (10500-500) x 2300 / 10000 Year 3 2150 6900 3600 (10500-500) x 2150 / 10000 Year 4 2100 9000 1500 (10500-500) x 2100 / 10000 Year 5 1000 10000 0 (10500-500) x 1000 / 10000

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