23. Saria Supply Printing Company, a calendar-year corporation, purchased a new

Question

23. Saria Supply Printing Company, a calendar-year corporation, purchased a new printing press for S16 April 1,20kI Additional costs of the press included sales tax of S percent (of purchase price), freight-in of and installation costs of $750. The press has a useful life of S years and 17,500 hours with no salvag value. a Compute the amount at which the printing press should be recorded as an asset. b. Compute the depreciation expense for 20xI and 20x2 using the straight-line depreciation method Compute the depreciation expense for 20x I and 20x2 using the units-of-production depreciation method if the press were used 2,750 hours in 20x I and 3,900 hours in 20x2. c.

Explanation / Answer

a) Compute amount should be recorded as as asset :

b) Depreciation straight line :

Straight line dep = 175000/5 = 35000 per annum

20X1 dep = 35000*9/12 = 26250

20X2 dep = 35000

C) Units of production depreciation

Depreciation rate = 175000/17500 = 10 per hour

20X1 dep = 2750*10 = 27500

20X2 dep = 3900*10 = 39000

Purchase cost 165000 Add: Sales tax (175000*5%) 8250 Add: Freight In 1000 Add: installation cost 750 Total cost of an asset 175000

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