Consider the follo Requirements (Click the i Read the 1. For each depreciation m
ID: 2607322 • Letter: C
Question
Consider the follo Requirements (Click the i Read the 1. For each depreciation method, prepare a depreciation schedule showing asset cost, Requirement 1 depreciation, and decimal places. depreciation expense, accumulated depreciation, and asset book value for each year of the asset's life. For the units-of-production method, round depreciation per unit to three decimal places. accumulated r unit to three 2. Chyler Enterprises, Inc., prepares financial statements using the depreciation method that reports the highest income in the early years of asset use. For income tax purposes, the company uses the depreciation method that minimizes income taxes in the early years Consider the first year Chyler Enterprises, Inc., uses the equipment. Identify the depreciation methods that meet Chyler Enterprises' objectives, assuming the income tax authorities permit the use of any method Before completing One year 3. Show how Chyler Enterprises, Inc., would report equipment on the December 31, 2016 balance sheet for each depreciation method Complete the Stra entering the amou hedule by Done On January 1, 2016, Chyler Enterprises, Inc., paid $235,400 for equipment used in manufacturing automotive supplies In addition to the basic purchase price, the company paid $600 transportation charges, $100 insurance for the equipment while in transit, $11,900 sales tax, and $2,000 for a special platform on which to place the equipment in the plant. Chyler Enterprises, Inc., management estimates that the equipment will remain in service for five years and have a residual value of $25,000. The equipment will produce 60,000 units the first year, with annual production decreasing by 10,000 units during each of the next four years (i.e., 50,000 units in year 2; 40,000 units in year 3; and so on for a total of 200,000 units). In trying to decide which depreciation method to use, Chyler Enterprises, Inc., requested a depreciation schedule for each of the three depreciation methods (straight-line, units-of-production, and double-declining balance) Befo per u Print Done Dep cos Complete the Units-of-Production Depreciation Schedule. Begin by filling out the schedule through 2017, and then complete the schedule by entering the amounts through 2020. (Enter depreciation per unit to three decimal places.) Units-of-Production Depreciation Schedule Depreciation Number of Depreciation Accumulated Asset Asset Cost Per Unit Units Expense Depreciation Book Value January 1, 2016 December 31, 2016 December 31, 2017 December 31, 2018 Choose from any list or enter any number in the input fields and then continue to the next questionExplanation / Answer
Answer
Total Cost of the Equipment = Purchase price + Transportation+ Insurance + Sales Tax + Special platform cost
= 235,400 + 600 + 100 + 11,900 + 2,000
Total Cost of the Truck = $250,000
Salvage Value = $25,000
Useful Life = 5 Years
Straight Line Method
Depreciation Per year = (Cost – Salvage Value) / Useful Life
= (250,000 - 25,000) / 5
= $45,000 per year
Depreciable value = Cost – Salvage Value
= 225,000 (250,000 - 25000)
Depreciation Rate = 1 / Useful Life
1 / 5
Depreciation Rate = 20%
Depreciation = Depreciation rate * Cost
Depreciation for the Year
Date
Asset Cost
Depreciable Cost
Depreciation Rate
Depreciation Expense
Accumulated Depreciation
Book Value
1/1/2016
250,000
250,000
12/31/2016
225,000
20%
45,000
45,000
205,000
12/31/2017
225,000
20%
45,000
90,000
160,000
12/31/2018
225,000
20%
45,000
135,000
115,000
12/31/2019
225,000
20%
45,000
180,000
70,000
12/31/2020
225,000
20%
45,000
225,000
25,000
Units of Production Method
Depreciable value = Cost – Salvage Value
= 225,000 (250,000 - 25000)
Total Units = 200,000
Depreciation per unit = $225,000 / 200,000 Units
Depreciation per unit = $1.125 Per Unit
Depreciation = (Units produced in that year / Total Units) * Depreciable Value
Depreciation for the Year
Date
Asset Cost
Depreciable Cost
Units
Depreciation Rate
Depreciation Expense
Accumulated Depreciation
Book Value
1/1/2016
250,000
250,000
12/31/2016
225,000
60,000
60,000/200,000
67,500
67,500
182,500
12/31/2017
225,000
50,000
50,000/200,000
56,250
123,750
126,250
12/31/2018
225,000
40,000
40,000/200,000
45,000
168,750
81,250
12/31/2019
225,000
30,000
30,000/200,000
33,750
202,500
47,500
12/31/2020
225,000
20,000
20,000/200,000
22,500
225,000
25,000
Total
200,000
Double Declining Balance
Depreciation rate = 2 * Straight line depreciation rate
= 2 * 20%
Depreciation rate = 40%
Depreciation = Book Value * Depreciation Rate
Depreciation for the Year
Date
Asset Cost
Depreciable Cost
Book Value
Depreciation Rate
Depreciation Expense
Accumulated Depreciation
1/1/2016
250,000
250,000
12/31/2016
250,000
150,000
40%
100,000
100,000
12/31/2017
90,000
40%
60,000
160,000
12/31/2018
54,000
40%
36,000
196,000
12/31/2019
32,400
40%
21,600
217,600
12/31/2020
19,440
40%
12,960
230,560
Requirement 2
There are 4 Blanks,
Requirement 3
31-Dec-16
SL
UOP
DDB
Equipment
250,000
250,000
250,000
Depreciation
45000
67,500
100,000
Net
205,000
182,500
150,000
Depreciation for the Year
Date
Asset Cost
Depreciable Cost
Depreciation Rate
Depreciation Expense
Accumulated Depreciation
Book Value
1/1/2016
250,000
250,000
12/31/2016
225,000
20%
45,000
45,000
205,000
12/31/2017
225,000
20%
45,000
90,000
160,000
12/31/2018
225,000
20%
45,000
135,000
115,000
12/31/2019
225,000
20%
45,000
180,000
70,000
12/31/2020
225,000
20%
45,000
225,000
25,000
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