Question : 71) On January 3, 2011, Hank’s Excavating Company purchased a : 1230209

 

71) On January 3, 2011, Hank’s Excavating Company purchased a bulldozer for $100,000. In addition to the basic purchase price, the company paid sales tax of $2,000 and freight charges of $6,000. The bulldozer will be used for 36,000 machine hours. Hank estimates that the bulldozer will have a useful life of 5 years and no residual value.

Required:

1.Compute the cost of the asset

2.Compute the depreciation expense for 2011 and 2012 using the:

a.straight-line method

b.units-of-production method assuming the bulldozer was used 5,000 machine hours in 2011 and 20,000 machine hours in 2012.

c.Double-declining balance method.

72) A plant asset is acquired by a business on January 1, 2010, for $60,000. The asset’s estimated residual value is $10,000 and its estimated life is 5 years. Management chooses to use straight-line depreciation.

On January 1, 2012, management revises the total useful life to 8 years and the residual value to $4,000. Compute the balance in accumulated depreciation on December 31, 2012.

73) Assume ABC Inc. purchased machinery for $350,000 and depreciated it on a straight-line basis over 20 years. The estimated residual value was zero. After using the machinery for 3 years, the company realized it will remain useful for only 5 more years and also revised the residual value to $12,000. Journalize entries to record the revised depreciation expense.

74) Martin Motors purchased a machine that will help diagnose problems with engines. The machine cost $210,000 on January 10, 2012 and a residual value of $10,000 was anticipated, with a useful life of 5 years.

In 2012, Martin Motors has a gross profit of $400,000 and operating expenses of $180,000.

A) Martin Motors has a tax rate of 35%. Compute the deprecation for 2012 under both the straight-line and double-declining balance method.

B) Which depreciation method, straight-line or accelerated method, should Martin Motors use for tax purposes? What is the net cash saved between the 2 methods?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75) Martin Motors purchased a machine that will help diagnose problems with engines. The machine cost $210,000 on January 10, 2010 and a residual value of $10,000 was anticipated, with a useful life of 5 years. These statistics are available:

 

 

DDB

Gross Profit

400,000

Operating expenses

180,000

Income before depreciation and taxes

220,000

Depreciation

84,000

Income before taxes

136,000

Taxes (35%)

47,600

Net Income

88,400

 

Martin Motors realized at the beginning of 2012 that the machine would last an additional 8 years. Martin Motors uses the DDB method.

 

Prepare the appropriate journal entry to record the depreciation expense for 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76) Amy’s Garden Company purchased a machine on June 6, 2011. The machine cost $100,000 and has a residual value of $10,000 and an estimated useful life of 5 years. The machine is expected to last 50,000 machine hours.

REQUIRED:

1. Calculate the depreciation expense for 2011 and 2012 using the straight-line method.

2. Calculate the depreciation expense for 2011 and 2012 using the units-of-production method. The machine was used for 8,000 machine hours in 2011 and 23,000 machine hours in 2012.

3. Calculate the depreciation expense for 2011 and 2012 using double-declining- balance depreciation