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Math  /  Algebra

Question1 A company purchased factory equipment on April 1, 2022 for $160,000\$ 160,000. It is estimated that the equipment will have a $20,000\$ 20,000 salvage value at the end of its 10 -year useful life, Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2022 is A) $16,000\$ 16,000 B) $14,000\$ 14,000 C) $10,500\$ 10,500 D) $12,000\$ 12,000 E) None of the above
2 If an asset costs $41,000\$ 41,000, has a residual value of $3,000\$ 3,000, and has a useful life of five years, the entry to record depreciation in the second year, using the double-declining-balance method, is A) Depreciation Expense Cash \$ 9,430 B) Depreciation Expense Accumulated Depreciation - Asset C) Depreciation Expense Accumulated Depreciation - Asset D) Accumulated Depreciation - Asset \$ 10,660 Depreciation Expense E) None of the above
3 Equipment is purchased for $120,000\$ 120,000. It has a five-year useful life and a $20,000\$ 20,000 residual value. Under the double declining balance method, what is the depreciation expense for year 3 ? A) $17,280\$ 17,280 B) $15,360\$ 15,360 C) $14,400\$ 14,400 D) $12,800\$ 12,800 E) None of the above

Studdy Solution

STEP 1

1. The straight-line method of depreciation evenly spreads the cost of an asset over its useful life.
2. The double-declining-balance method is an accelerated depreciation method that doubles the rate of straight-line depreciation.

STEP 2

1. Calculate the straight-line depreciation for the first problem.
2. Calculate the double-declining-balance depreciation for the second problem.
3. Calculate the double-declining-balance depreciation for the third problem.

STEP 3

Calculate the straight-line depreciation for the first problem.
1.1 Determine the depreciable cost of the equipment: Depreciable Cost=Cost−Salvage Value=$160,000−$20,000=$140,000 \text{Depreciable Cost} = \text{Cost} - \text{Salvage Value} = \$160,000 - \$20,000 = \$140,000
1.2 Calculate the annual depreciation expense using the straight-line method: Annual Depreciation=Depreciable CostUseful Life=$140,00010=$14,000 \text{Annual Depreciation} = \frac{\text{Depreciable Cost}}{\text{Useful Life}} = \frac{\$140,000}{10} = \$14,000
1.3 Calculate the depreciation expense for the period from April 1, 2022, to December 31, 2022: Depreciation for 9 months=912×$14,000=$10,500 \text{Depreciation for 9 months} = \frac{9}{12} \times \$14,000 = \$10,500
The amount to be recorded as depreciation expense at December 31, 2022, is: $10,500 \boxed{\$10,500}

STEP 4

Calculate the double-declining-balance depreciation for the second problem.
2.1 Determine the double-declining rate: Double-declining rate=2Useful Life=25=40% \text{Double-declining rate} = \frac{2}{\text{Useful Life}} = \frac{2}{5} = 40\%
2.2 Calculate the depreciation expense for the first year: First Year Depreciation=Cost×Rate=$41,000×0.40=$16,400 \text{First Year Depreciation} = \text{Cost} \times \text{Rate} = \$41,000 \times 0.40 = \$16,400
2.3 Calculate the book value at the end of the first year: Book Value=Cost−First Year Depreciation=$41,000−$16,400=$24,600 \text{Book Value} = \text{Cost} - \text{First Year Depreciation} = \$41,000 - \$16,400 = \$24,600
2.4 Calculate the depreciation expense for the second year: Second Year Depreciation=Book Value×Rate=$24,600×0.40=$9,840 \text{Second Year Depreciation} = \text{Book Value} \times \text{Rate} = \$24,600 \times 0.40 = \$9,840
The entry to record depreciation in the second year is: Depreciation Expense Accumulated Depreciation - Asset $9,840 \boxed{\text{Depreciation Expense Accumulated Depreciation - Asset \$9,840}}

STEP 5

Calculate the double-declining-balance depreciation for the third problem.
3.1 Determine the double-declining rate: Double-declining rate=2Useful Life=25=40% \text{Double-declining rate} = \frac{2}{\text{Useful Life}} = \frac{2}{5} = 40\%
3.2 Calculate the depreciation expense for the first year: First Year Depreciation=Cost×Rate=$120,000×0.40=$48,000 \text{First Year Depreciation} = \text{Cost} \times \text{Rate} = \$120,000 \times 0.40 = \$48,000
3.3 Calculate the book value at the end of the first year: Book Value=Cost−First Year Depreciation=$120,000−$48,000=$72,000 \text{Book Value} = \text{Cost} - \text{First Year Depreciation} = \$120,000 - \$48,000 = \$72,000
3.4 Calculate the depreciation expense for the second year: Second Year Depreciation=Book Value×Rate=$72,000×0.40=$28,800 \text{Second Year Depreciation} = \text{Book Value} \times \text{Rate} = \$72,000 \times 0.40 = \$28,800
3.5 Calculate the book value at the end of the second year: Book Value=Book Value−Second Year Depreciation=$72,000−$28,800=$43,200 \text{Book Value} = \text{Book Value} - \text{Second Year Depreciation} = \$72,000 - \$28,800 = \$43,200
3.6 Calculate the depreciation expense for the third year: Third Year Depreciation=Book Value×Rate=$43,200×0.40=$17,280 \text{Third Year Depreciation} = \text{Book Value} \times \text{Rate} = \$43,200 \times 0.40 = \$17,280
The depreciation expense for year 3 is: $17,280 \boxed{\$17,280}

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