World Champion Pittsburgh Penguin Company purchased the following assets on Janu

Question

World Champion Pittsburgh Penguin Company purchased the following assets on January 1, 2016 Building: The s·ne_ once "at be fr n ped cash in the bmount or s1,000,000. The Compan Equip i nas, r pece ofeuetor ted equ or that he mpaa soo o o the ea ner. ..stm.eed to have·weful ife of 200 000 hours of use and has a used the equipment for 35,000 hours during 2010 The unts of activity method of depreciation wil be used y estimates it has a useful lide of 40 years with asalvage value of $160,000. Straight line depreciation will be used. 1. Calculate depreciation expense for 2016 for the building and prepire the journal entry 2. Calculate the depreciation expense for 2016 for the equipment and prepare the journal entry . Assume that the Company used the double decining balance method of depreciation for the building. Calcuiate the depreciation expense for 2016 and 2017 for the building, no journal entries are required, juat the toa estimated selvage value of $100,000 The Company Clearly label each of your answers and show all calculations.

Explanation / Answer

1 Straight line method: Particulars Debit credit Depreciation A/c 21000       Building 21000 $ Purchase price 1000000 Salvage value 160000 840000 useful life 40 years Depreciation 21000 2 Depreciation expense for equipment Asset cost 700000 salavage value 100000 600000 Useful life 200000 Hours used 35000 Depreciation per unit 600000*35000/200000 105000 Particulars Debit credit Depreciation 105000        Equipment 105000 3 Double declining Balance method: depreciation rate: 100%/useful life 100/40 2.5 Dep rate: 2.5*2 5% DEP for 2016 1000000*5% 50000 Dep for 2017 950000*5% 47500

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