A couple accounting questions I have on Capital Assets: 1. A coal mine cost $2,0
ID: 2543851 • Letter: A
Question
A couple accounting questions I have on Capital Assets:
1.
A coal mine cost $2,000,000 and contained an estimated 1,600,000 tons of coal. In Year 1, 400,000 tons were extracted. What is the depletion expense in Year 1?
$800,000
$500,000
None of the other alternatives are correct
$2,000,000
$400,000
2.
On May 1, 2015, Casico Toy Inc. purchased a new piece of equipment that cost $52,000. The estimated useful life is five years and the estimated residual value is $ 4,000. During the five years of useful life the equipment is expected to produce 20,000 units.
Assume that the equipment was purchased on January 1st, 2015. If the company uses the double declining balance method of depreciation, what is the depreciation expense for the year ended December 31st, 2018?
None of the other alternatives are correct
$3,000
$ 0
$ 3,250
$ 750
Explanation / Answer
Answer 1 - $ 5,00,000
Depreciation Expense for the year 1 = $ 20,00,000 x ( 4,00,000 Tons / 16,00,000 Tons )
= $ 5,00,000
Answer 2 - None of the other alternatives are correct
Year
Book Value Begining
Double Declining Depreciation = 2 x SL Depreciation Rate x Book Value Begining
Net Book Value End
2015
52000
20800
31200
2016
31200
12480
18720
2017
18720
7488
11232
2018
11232
4493
6739
2019
6739
2739
4000
Stright Line Depreciation rate = 1/5 = 20%
Depreciation for the year 2018 = $ 4493,
Year
Book Value Begining
Double Declining Depreciation = 2 x SL Depreciation Rate x Book Value Begining
Net Book Value End
2015
52000
20800
31200
2016
31200
12480
18720
2017
18720
7488
11232
2018
11232
4493
6739
2019
6739
2739
4000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.