equipment's useful life, Granny's Fried Chicken estimates that its residual value will be se year, and 1,050 hours the fourth year. d the requirements. quirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, an e, units-of-production, and double-declining-balance. Show your computations. Note: Thre egin by preparing a depreciation schedule using the straight-line method.
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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- For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.
- Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual value was 500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: 1. Compute depredation expense (rounded to the nearest dollar) for 2019 and 2020 using the: a. straight-line method b. sum-of-the-years-digits method c. double-declining-balance method 2. Next Level Which method produces the highest book value at the end of 2020? 3. Next Level Which method produces the highest charge to income in 2020? 4. Next Level Over the life of the asset, which method produces the greatest amount of depreciation expense?Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.
- Wonder Fried Chicken bought equipment on January 2, 2024, for $27,000. The equipment was expected to remain in service for four years and to operate for 4,200 hours. At the end of the equipment's useful life, Wonder estimates that its residual value will be $6,000. The equipment operated for 420 hours the first year, 1,260 hours the second year, 1,680 hours the third year, and 840 hours the fourth year. Read the requirements. Requirements 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. 2. Which method tracks the wear and tear on the equipment most closely? Print Date 1-2-2024 12-31-2024 12-31-2025 12-31-2026 12-31-2027 Requirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the…Mama's Frid Chicken bought equipment on January 2, 2018, for $30,000. The equipment was expected to remain in service for four years and to operate for 4,8000 hours. At the end of the equipment's useful life, Mama's estimates that its residual value will be $6,000. The equipment operated for 480 hours the first year, 1,440 hours the second year, 1,920 hours the third year, and 960 hours the fourth year. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. Which method tracks the wear and tear on the equipment most closely?Granny's Fried Chicken bought equipment on January 2, 2024, for $21,000 The equipment was expected to remain in service for four years and to operate for 3.600 hours. At the end of the equipment's useful life, Granny's estimates that its residual value will be $3,000. The equipment operated for 360 hours the first year, 1,080 hours the second year, 1,440 hours the third year, and 720 hours the fourth year Read the requirements Requirement 1. Prepare a schedule of depreciation expense; accumulated depreciation, and book value per year for the equipment under the three depreciation methods straight-line, units of production, and double declining-balance Show your computations. Note: Three depreciation schedules must be prepared. Begin by preparing a depreciation schedule using the straight-line method Straight Line Depreciation Schedule Date 1-2-2024 12-31-2024 12-31-2025 12-31-2026 12-31-2027 Asset Cost Depreciation for the Year Useful Life Depreciable. Cost Book Depreciation…
- K- Granny's Fried Chicken bought equipment on January 2, 2024, for $21,000. The equipment was expected to remain in service for four years and to operate for 3,600 hours At the end of the equipment's useful life, Granny's estimates that its residual value will be $3,000. The equipment operated for 360 hours the first year, 1,000 hours the second year, 1,440 hours the third year, and 720 hours the fourth year Read the requirements Asset Date Cost 1-2-2024 S 21,000 12-31-2024 12-31-2025 12-31-2026 12-31-2027 Depreciable Cost $ 18,000 10.000. 18.000 18,000 Useful Life 4 years 4 years 4 years 4 years M Residual value Depreciation Accumulated Expense Depreciation S 4,500 $ 4,500 4.500 4,500 4,500 9,000 Useful life in units 13,500 18.000 Hook Value Before calculating the units of production depreciation schedule, calculate the depreciation expense per unit. Select the formula, then enter the amounts and calculate the depreciation expense per unit Cost $ 21,000 16,500 12.000 7,500 3,000…Seconds Fried Chicken bought equipment on January 2, 2018, for $39,000. The equipment was expected to remain in service for four years and to operate for 8,250 hours. At the end of the equipment's useful life, Seconds estimates that its residual value will be $6,000. The equipment operated for 825 hours the first year, 2,475 hours the second year, 3,300 hours the third year, and 1,650 hours the fourth year. Requirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. Begin by preparing a depreciation schedule using the straight-line method. Straight-Line Depreciation Schedule Depreciation for the Year Asset Depreciable Useful Depreciation Accumulated Вook Date Cost Cost Life Expense Depreciation Value 1-2-2018 12-31-2018 12-31-2019 12-31-2020…Bonita Manufacturing purchased a machine on January 1, 2023 for use in its factory. Bonita paid $799,000 for the machine and estimated that it had a useful life of 10 years, at the end of which time the machine was expected to have a residual value of $20,000.During its life, the machine was expected to produce 380,000 units. During 2023, the machine produced 42,700 units, and produced 61,500 in 2024. The machine was subject to a 20% CCA rate, and Bonita's year-end was December 31. The machine is eligible for theAccelerated Investment Incentive. (a) Calculate the annual depreciation amount for 2023 and 2024 using the straight-line method. b) Calculate the annual depreciation amount for 2023 and 2024 under the activity method. c) Calculate the annual depreciation amount for 2023 and 2024 under the double-declining balance method. d) Calculate the annual depreciation amount for 2023 and 2024 under the capital cost allowance method.