ACCTG311 Lecture Notes - Lecture 8: Hydraulic Press, Sales Tax, Canadian Pacific Railway

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erinwasp633

25 Nov 2014

School

University of Alberta

Department

Accounting

Course

ACCTG311

Professor

Kristie Dewald

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Document Summary

Strathcona steel inc. purchased a hydraulic press for ,000 on march 1, year 1. The press is expected to have a useful life of 5 years or 8,000 hours, and a residual value of ,000. Assuming the company has a december 31 year end, determine depreciation expense for each year using the following methods and assumptions: on the straight-line basis, on the units of production basis. Usage for each year is noted in the table below. Seminar #8: on the double diminishing balance basis. Use the following table to help track depreciation and accumulated depreciation. Comparing the methods: the diminishing balance method does not consider the residual value as part of the calculation of depreciation expense. Assume that, at the end of year 2, strathcona"s business changed such that they required larger equipment. As such, they sell the press for proceeds of ,000.

Related Questions

P10-3A

On January 1, 2008, Pele Company purchased the following twomachines for use in its production process.
Machine A The cash price of this machine was $38,000. Relatedexpenditures included: sales tax $1,700, shipping costs $150,insurance during shipping $80, installation and testing costs $70,and $100 of oil and lubricants to be used with the machinery duringits first year of operations. Pele estimates that the useful lifeof the machine is 5 years with a $5,000 salvage value remaining atthe end of that time period. Assume that the straight-line methodof depreciation is used.
Machine B The recorded cost of this machine was $160,000. Peleestimates that the useful life of the machine is 4 years with a$10,000 salvage value remaining at the end of that timeperiod.

Correct.

Prepare the following for Machine A.
1. The journal entry to record its purchase on January 1,2008.
2. The journal entry to record annual depreciation at December 31,2008.
Account / Description Debit Credit
1. Machinery
$ 40000

Cash
$ 40000

2. Depreciation expense
$ 7000

Accumulated depreciation
$ 7000

This part is not coming out

Incorrect.

Calculate the amount of depreciation expense that should record formachine B each year of its useful life under the followingassumptions. (Round depreciation cost per unit to 2 decimal places.Round final answers to 0 decimal places, e.g. 125.)

Pele uses the straight-line method of depreciation.
Pele uses the declining-balance method. The rate used is twice thestraight-line rate.
Pele uses the units-of-activity method and estimates that theuseful life of the machine is 125,000 units. Actual usage is asfollows: 2008, 45,000 units; 2009, 35,000 units; 2010, 25,000units; 2011, 20,000 units.

Year 1
Year 2
Year 3
Year 4

1.
Straight-line
$
$
$
$

2.
Declining-balance
$
$
$
$

3.
Units-of-activity
$
$
$
$

Year 4 1. 4000

2. 24000

3 .2400

Incorrect.

Which method used to calculate depreciation on machine B reportsthe highest amount of depreciation expense in year 1 (2008)?declining-balance method This is correct

The highest amount in year 4 (2011)? units-of-activity methodallmethods are the samedeclining-balance methodstraight-linemethod

The highest total amount over the 4-year period? declining-balancemethodunits-of-activity methodall methods are the samestraight-linemethod

lavenderbeaver984

Comparing Three Depreciation Methods

Dexter Industries purchased packaging equipment on January 8 for $310,600. The equipment was expected to have a useful life of three years, or 7,500 operating hours, and a residual value of $25,600. The equipment was used for 3,000 hours during Year 1, 2,325 hours in Year 2, and 2,175 hours in Year 3.

Required:

1. Determine the amount of depreciation expense for the three years ending December 31, Year 1, Year 2, Year 3, by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the three years by each method.

Note: For all methods, round the answer for each year to the nearest whole dollar.

Depreciation Expense
Year	Straight-Line Method	Units-of-Activity Method	Double-Declining-Balance Method
Year 1	$	$	$
Year 2	$	$	$
Year 3	$	$	$
Total	$	$	$

2. What method yields the highest depreciation expense for Year 1?
All three depreciation methods

3. What method yields the most depreciation over the three-year life of the equipment?

13.

Equipment was purchased on January 5, 2011, at a cost of$90,000. The equipment had an estimated useful life of 8 years andan estimated residual value of $8,000.

After using the equipment for 3 years, the useful life was revisedto a total of 10 years and the residual value was reduced to$2,004.

Determine the straight-line depreciation expense for the year 2014and following years.

14. Machinery acquired at a cost of $80,000 and on whichthere is accumulated depreciation of $55,000 (includingdepreciation for the current year to date) is exchanged for similarmachinery. For financial reporting purposes, present entries torecord the disposition of the old machinery and the acquisition ofnew machinery under each of the following assumptions:

(a)	Price of new, $120,000; trade-in allowance on old, $4,000;balance paid in cash.
(b)	Price of new, $120,000; trade-in allowance on old, $34,000;balance paid in cash.

15.

Machinery is purchased on July 1 of the current fiscal yearfor $240,000. It is expected to have a useful life of 4 years, or25,000 operating hours, and a residual value of $15,000. Computethe depreciation for the last six months of the current fiscal yearending December 31 by each of the following methods:

(a)	straight-line
(b)	declining-balance at twice the straight-linerate
(c)	units-of-production (used for 1,600 hours during thecurrent year)

(Round the answer to the nearestdollar.)

orangelion215

ACCTG311 Lecture Notes - Lecture 8: Hydraulic Press, Sales Tax, Canadian Pacific Railway

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