On April 1, 2017, Morrow Inc. purchased a spooler at a cost of $36,000. The equi
ID: 2530432 • Letter: O
Question
On April 1, 2017, Morrow Inc. purchased a spooler at a cost of $36,000. The equipment is expected to last four years and have a residual value of $4,000. Using the straight-line method, provide the yearly depreciation expense, ending accumulated depreciation, and ending book value for all four years. 1. 2. Answer the following questions a. How much depreciation expense will occur during 2017? b. What is the spooler's book value on December 31, 2018? 3. Using the double-declining method, provide the yearly depreciation expense, ending accumulated depreciation, and ending book value for all four years. Answer the following questions: 4. a. How much accumulated depreciation will be on the books as of December 31,2019? b. What is the spooler's book value on December 31, 2021? Using the sum-of-the-years' digit method, provide the yearly depreciation expense, ending accumulated depreciation, and ending book value for all eight years. Answer the following questions: 5. 6. How much depreciation expense will be booked during 2021? What is the spooler's book value on December 31, 2020? a. b.Explanation / Answer
Answers
A
Cost
$ 36,000.00
B
Residual Value
$ 4,000.00
C=A - B
Depreciable base
$ 32,000.00
D
Life [in years]
4
E=C/D
Annual SLM depreciation
$ 8,000.00
Year
Book Value
Depreciation expense
Ending Book Value
Accumulated Depreciation
1
$ 36,000.00
$ 8,000.00
$ 28,000.00
$ 8,000.00
2
$ 28,000.00
$ 8,000.00
$ 20,000.00
$ 16,000.00
3
$ 20,000.00
$ 8,000.00
$ 12,000.00
$ 24,000.00
4
$ 12,000.00
$ 8,000.00
$ 4,000.00
$ 32,000.00
(a)2017 Depreciation expense will be ($8000 x 9months/12months) = $6,000
(b)Dec 31, 2018 Book Value will be $36000 - $6000(2017 dep) - $8000(2018 dep) = $22,000
A
Cost
$ 36,000.00
B
Residual Value
$ 4,000.00
C=A - B
Depreciable base
$ 32,000.00
D
Life [in years]
4
E=C/D
Annual SLM depreciation
$ 8,000.00
F=E/C
SLM Rate
25.00%
G=F x 2
DDB Rate
50.00%
Year
Beginning Book Value
Depreciation rate
Depreciation expense
Ending Book Value
2017
$ 36,000.00
50.00%
$13500[9 months]
$ 22,500.00
2018
$ 22,500.00
50.00%
$11250
$ 11,250.00
2019
$ 11,250.00
50.00%
$5625
$ 5,625.00
2020
$ 5,625.00
$1625
$ 40000
(a)Accumulated depreciation till 31 dec 2019 = 13500 + 11250 + 5625 = $30,375
(b)Dec 31, 2021 Book Value will be equal to $32000 (Residual value) because asset will be fully depreciated by Mar 31, 2021
A
Cost
$ 36,000.00
B
Residual Value
$ 4,000.00
C=A - B
Depreciable base
$ 32,000.00
Sum of digits
10
Year
Depreciable base
Formula
Depreciation expense
Accumulated Depreciation
2017-2018
$ 32,000.00
[32000x4/10]
$ 12,800.00
$ 12,800.00
2018-2019
$ 32,000.00
[32000x3/10]
$ 9,600.00
$ 22,400.00
2019-2020
$ 32,000.00
[32000x2/10]
$ 6,400.00
$ 28,800.00
2020-2021
$ 32,000.00
[32000x1/10]
$ 3,200.00
$ 32,000.00
(a)Depreciation expense will be for 3 months for 2021 = $3200 x 3/12 = $800
(b) Book Value on 31 Dec 2020 will be :
Accumulated depreciation till 31 Mar 2020 = $28800
(+) 9 months depreciation for 2020 = $3200 x 9/12 = $2400
Total accumulated depreciation till 31 Dec 2020 = 28800 + 2400 = $31,200
Book value on 31 dec 2020 = $36000 - $31200 = $4,800
A
Cost
$ 36,000.00
B
Residual Value
$ 4,000.00
C=A - B
Depreciable base
$ 32,000.00
D
Life [in years]
4
E=C/D
Annual SLM depreciation
$ 8,000.00
Year
Book Value
Depreciation expense
Ending Book Value
Accumulated Depreciation
1
$ 36,000.00
$ 8,000.00
$ 28,000.00
$ 8,000.00
2
$ 28,000.00
$ 8,000.00
$ 20,000.00
$ 16,000.00
3
$ 20,000.00
$ 8,000.00
$ 12,000.00
$ 24,000.00
4
$ 12,000.00
$ 8,000.00
$ 4,000.00
$ 32,000.00
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