Solve the problems I Value 10 points Ermler Company purchased a machine at a cos

Question

Solve the problems I Value 10 points Ermler Company purchased a machine at a cost of $80,000. The machine is expected to have a $5,000 salvage valuc at the end of its 5-year useful life. Instructions Compute annual depreciation for the first and second years using the (a) straight-line method. (b) double-declining-balance method II. Value 15 points Alvarado Company purchased a new machine for $400,000. It is estimated that the machine will have a S40,000 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used. Instructions Prepare a depreciation schedule which shows the annual depreciation expense on the machine for its 5-year life. III. Value 15 points Yohnalasse Corporation has the following stockholders' equity accounts on January 1, 2017 Common Stock, $10 par value Paid-in Capital in Excess of Par Retained Earnings. S1,500,000 500 $2.200.000 200,000 Total Stockholders' Equity. The company uses the cost method to account for treasury stock transactions. During 2017, t following treasury stock transactions occurred: April Purchased 10,000 shares at S18 per share.

Explanation / Answer

1 calculation of depreciation a straight line method depreciation cost of the asset - salvage value / number of years 80000 - 5000 / 5 15000 year depreciation 1 15000 2 15000 b double declining balance method depreciation rate depreciation as per straight line method / (cost of the asset - salvage value ) * 2 {15000 / ( 80000 - 5000 ) } * 2 (15000 / 75000 ) * 2 40% 1 2 3 4 year opening book value depreciation ( 2 * 40 % ) closing book value ( 2 - 3 ) 1 80000 32000 48000 2 48000 19200 28800

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