Problems. Th problem number. Show all work for complete credit. You may so desir
ID: 2574737 • Letter: P
Question
Problems. Th problem number. Show all work for complete credit. You may so desire. Please be NEAT Problems portion of the test is worth a total of 30 points. ere are four problems. Each one is worth the score indicated next to the attach extra pages if you when writing your answers. I cannot grade illegible answers. points) Brenan, Inc. purchased equipment at the beginning of 2004 for $2.100.000 Brenan. The equipment has an estimated residual value (salvage value) of $100,000 and an estimated life of 5 years or 100,000 hours of operation. The for 15,000 hours in 2004, 20,000 hours in 2005, 35,000 hours in 2006, 20,000 hours in 2007, and 10,000 hours in 2008. Create a depreciation schedule for each of the following depreciation methods for the years 2004 to 2008: 1. 2. 3. Straight-line depreciation method Units-of-production method Double-declining-balance depreciation method a. Straight-Line Cost Book Value Depreciation Accumulated Book Value theginning) -Expense-. Depreciation -(ending) ,100, 00 D Date ,0, 2,180, 0 400,00o 2,100,000 | 1,100,000 | 400,000 2005 | Soo,o 2006210,0 1,300, 6400,000 1,200,000 00.0 2008 2,10 b. Units-of-Production Book Value Depreciation Accumulated Book Value (beginning) Expense Depreciation (ending) Date ors,coo 2,60 S, Doo 2,030,ooro 2004 2,100,9 2,035, 126,000 35, opo 7D, bo 2,100,00 2,1 00,e0 o 2,Ioo,col 20 0D0 c. Double-Declining BalanceExplanation / Answer
Answer:
1
Depreciation using Straight Line method
= (Initial Inv - Salvage)/life
= (2,100,000-100,000)/5
= 400,000 per year depreciation
year
Beginning
Book value
Depreciation
Accumulated
depreciation
Ending
Book value
2004
2,100,000
400,000
400,000
1,700,000
2005
1,700,000
400,000
800,000
1,300,000
2006
1,300,000
400,000
1,200,000
900,000
2007
900,000
400,000
1,600,000
500,000
2008
500,000
400,000
2,000,000
100,000
_________________________________________
2
Depreciation using units of production method
= (Initial Inv - Salvage)/Units of production during the life
= (2,100,000-100,000)/100,000
= $20 per unit depreciation
year
Beginning
Book value
Calculation
For
deorciaition
Depreciation
Accumulated
depreciation
Ending
Book value
2004
2,100,000
15000*20
300,000
300,000
1,800,000
2005
1,800,000
20000*20
400,000
700,000
1,400,000
2006
1,400,000
35000*20
700,000
1,400,000
700,000
2007
700,000
20000*20
400,000
1,800,000
300,000
2008
300,000
10000*20
200,000
2,000,000
100,000
_______________________________________
3
Double Declining balance method of depreciation
In DDB method we take the dedication 200% then what we take in straight line
So deprecation as per DDB
=200% x (100/5)
=200% x20%
=40%
year
Cost
Beginning
Book value
Depreciation
Accumulated
depreciation
Ending
Book value
2004
2,100,000
2,100,000
2,100,000*40%
840,000
840,000
1,260,000
2005
2,100,000
1,260,000
1,260,000*40%
504,000
1,344,000
756,000
2006
2,100,000
756,000
756,000*40%
302,400
1,646,400
453,600
2007
2,100,000
453,600
453,000*40%
181,440
1,827,840
272,160
2008
2,100,000
272,160
272160-100,000
172,160
2,000,000
100,000
In the last year we adjusted the balance in depreciation so ending book value remain 100,000
Entry for the year 2006 will be as under:
Date
Description
Debit $
Credit $
2006
Depreciation Expanses
302,400
To accumulated depreciation
302,400
year
Beginning
Book value
Depreciation
Accumulated
depreciation
Ending
Book value
2004
2,100,000
400,000
400,000
1,700,000
2005
1,700,000
400,000
800,000
1,300,000
2006
1,300,000
400,000
1,200,000
900,000
2007
900,000
400,000
1,600,000
500,000
2008
500,000
400,000
2,000,000
100,000
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