Page 3 PART 2: PROBLEMS (20 points) Blume in 2017 Instructions: Compute the annu
ID: 2536087 • Letter: P
Question
Page 3 PART 2: PROBLEMS (20 points) Blume in 2017 Instructions: Compute the annual depreciation expense for 2016 and 2017, under the following depreciation pany purchased equipment for $250,000 cash on January 1, 2016. The estimated life is 4 years units salvage value is estimated at $10,000. Actual activity was 52,500 units in 2016 and 67,500 u methods: (1) units-of-activity.(2) straight-line, and (3) double-declining-balance. SHOW YOUR WOk WILL NOT RECEIVE ANY CREDIT 1. Units-of-activity 2016 depreciation S 2017 depreciation 2. Straight-line 2016 depreciation 2017 depreciation 3. Double-declining-balance 2016 depreciation 2017 depreciation $Explanation / Answer
Purchase Value 250000 Less: Salvage Value 10000 Net Depreciable Value 240000 Useful Life 4.00 1 Unit of Activity: Purchase Value 250000 Less: Salvage Value 10000 Net Depreciable Value 240000 Total Units 300000 Depreciation Rate PU 0.80 (240000/300000) A B A*B Year Activity Rate Depreciation 2016 52500 0.80 42000 2017 67500 0.80 54000 2 Straight Line: Purchase Value 250000 Less: Salvage Value 10000 Net Depreciable Value 240000 Useful Life 4.00 Depreciation PA 60000 Year Depreciation 2016 60000 2017 60000 3 Double Declining Method: Useful Life 4.00 Rate of Depreciation 1/Life 1/4 Rate of Depreciation 25.00% Double Rate 50.00% Year 2016 Purchase Value 250000 Rate of Double D Meth 50.00% Depreciation for 2016 125000 (250000*50%) Year 2017 Opening Balance for 2017 125000 Rate of Double D Meth 50.00% Depreciation for 2017 62500 (125000*50%)
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