MKG, Inc. paid $400,000 for a piece of equipment that is expected to have a 12 year useful life. In this industry the residual value of equipment is initially estimated at 10% of the asset's cost. On January 1, 2021 MKG Inc. performed an extraordinary repair on the equipment at a cost of $70,000 that extended the useful life to a total of 17 years and changed the residual value to $30,000. Assuming, MKG Inc. uses the straight-line depreciation method, calculate the amount of depreciation expense reported on the December 31, 2021 income statement? O $30,000 O $25,000 O $20,588 O $22,857 O None of the above.

MKG, Inc. paid $400,000 for a piece of equipment that is expected to have a 12 year useful life. In this industry the residual value of equipment is initially estimated at 10% of the asset's cost. On January 1, 2021 MKG Inc. performed an extraordinary repair on the equipment at a cost of $70,000 that extended the useful life to a total of 17 years and changed the residual value to $30,000. Assuming, MKG Inc. uses the straight-line depreciation method, calculate the amount of depreciation expense reported on the December 31, 2021 income statement? O $30,000 O $25,000 O $20,588 O $22,857 O None of the above.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 8P: Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of...

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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?
During the current year, Arkells Inc. made the following expenditures relating to plant machinery. Renovated seven machines for $250,000 to improve efficiency in production of their remaining useful life of eight years Low-cost repairs throughout the year totaled $79,000 Replaced a broken gear on a machine for $6,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?
On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
During the current year, Arkells Inc. made the following expenditures relating to plant machinery. Renovated five machines for $100,000 to improve efficiency in production of their remaining useful life of five years Low-cost repairs throughout the year totaled $70,000 Replaced a broken gear on a machine for $10,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?
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.
The following are independent errors: a. In January 2019, repair costs of 9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was 100,000. No residual value is expected, the remaining estimated life is 10 years, and straight-line depreciation is used. b. All purchases of materials for construction contracts still in progress have been immediately expensed. It is discovered that the use of these materials was 10,000 during 2018 and 12,000 during 2019. c. Depreciation on manufacturing equipment has been excluded from manufacturing costs and treated as a period expense. During 2019, 40,000 of depreciation was accounted for in that manner. Production was 15,000 units during 2019, of which 3,000 remained in inventory at the end of the year. Assume there was no inventory at the beginning of 2019. Required: Prepare journal entries for the preceding errors discovered during 2020. Ignore income taxes.
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
The cost of equipment purchased by Charleston, Inc., on January 1, 2020, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 525,000 units. During 2020, the machine was operated 6,000 hours and produced 55,000 units. During 2021, the machine was operated 5,500 hours and produced 48,000 units. Instructions: Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. a. Straight-line. b. Units-of-output. c. Working hours d. Sum-of-the-years’-digits. e. Declining-balance (twice the straight-line rate).
The cost of equipment purchased by Charleston, Inc., on June 1, 2020, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 525,000 units. During 2020, the machine was operated 6,000 hours and produced 55,000 units. During 2021, the machine was operated 5,500 hours and produced 48,000 units. Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. (d) Sum-of-the-years'-digits (e) Double-declining-balance (twice the straight-line rate)
The cost of equipment purchased by Charleston, Inc., on June 1, 2020, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 525,000 units. During 2020, the machine was operated 6,000 hours and produced 55,000 units. During 2021, the machine was operated 5,500 hours and produced 48,000 units. Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. a) Straight-line (b) Units-of-output (c) Working hours (d) Sum-of-the-years'-digits (e) Double-declining-balance (twice the straight-line rate)
On January 1, 2017 MKG, Inc. paid $350,000 for a piece of equipment that is expected to have a 10 year useful life. In this industry the residual value of equipment is initially estimated at 10% of the asset's cost. On January 1, 2021 MKG Inc. performed an extraordinary repair on the equipment at a cost of $60,000 that extended the useful life to a total of 16 years and changed the residual value to $20,000. Assuming. MKG Inc. uses the straight-line depreciation method, calculate the amount of depreciation expense reported on the December 31, 2021 income statement? Answer: $
The cost of equipment purchased by Charleston, Inc., on June 1, 2020, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 525,000 units. During 2020, the machine was operated 6,000 hours and produced 55,000 units. During 2021, the machine was operated 5,500 hours and produced 48,000 units. Instructions Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. a. Straight-line. d. Sum-of-the-years’-digits. b. Units-of-output. e. Declining-balance (twice the straight-line rate). c. Working hours.