P9-3A
a. (1) Factory Machinery
Cash
Price R$
38,000
Sales
tax R$
1,700
Shipping
Cost R$ 150
Insurance
during shipping R$ 80
Installation and
testing R$ 70
R$
40,000
Jan
1 Factory Machinery 40,000
Oil and Lubricants 100
Cash 40,100
(2) Dec 31 Depreciation Expense 7,000
Accumulated Depreciation 7,000
(40,000-5,000=
35,000 : 5 = 7,000 )
b. (1)
Straight-line
Cost – residual value = depreciation cost
: useful life = annual
depreciation expense
R$ 160,000 – R$ 10,000 = R$ 150,000
– 4 = R$
37,500
Depreciation
Rate = 100% : 4 =
25%
PELE COMPANY
|
|||||||
Computation
|
=
|
Annual
Depreciation
Expense
|
End
of Year
|
||||
Year
|
Depreciable
Cost
|
X
|
Depreciation
Rate
|
Accumulated
Depreciation
|
Book
Value
|
||
2011
|
R$
150,000
|
25%
|
R$
37,500
|
R$
37,500
|
R$
122,500
|
||
2012
|
150,000
|
25%
|
37,500
|
75,000
|
85,000
|
||
2013
|
150,000
|
25%
|
37,500
|
112,500
|
47,500
|
||
2014
|
150,000
|
25%
|
37,500
|
150,000
|
10,000
|
(2)
Declining Balance
Depreciation Rate = 100% : 4 = 25% X 2 = 50%
Book value of
beginning of year X Declining balance rate
= Annual Depreciation Expense
R$ 160,000 X 50%
= R$ 80,000
PELE COMPANY
|
|||||||
Computation
|
=
|
Annual
Depreciation
Expense
|
End of Year
|
||||
Year
|
Depreciable
Cost
|
X
|
Depreciation
Rate
|
Accumulated
Depreciation
|
Book
Value
|
||
2011
|
R$
160,000
|
50%
|
R$
80,000
|
R$
80,000
|
R$
80,000
|
||
2012
|
80,000
|
50%
|
40,000
|
120,000
|
40,000
|
||
2013
|
40,000
|
50%
|
20,000
|
140,000
|
20,000
|
||
2014
|
20,000
|
50%
|
10,000
|
150,000
|
10,000
|
(3)
Units of Activity
Depreciable Cost – Total Units of
Activity = Depreciation cost per unit
R$ 150,000 – 125,000 = R$ 1,2
PELE COMPANY
|
|||||||
Computation
|
=
|
Annual
Depreciation
Expense
|
End of Year
|
||||
Year
|
Units of
Activity
|
X
|
Depreciation
Cost/Unit
|
Accumulated
Depreciation
|
Book
Value
|
||
2011
|
45,000
|
R$
1,2
|
R$
54,000
|
R$
54,000
|
R$
106,000
|
||
2012
|
35,000
|
1,2
|
42,000
|
96,000
|
64,000
|
||
2013
|
25,000
|
1,2
|
30,000
|
126,000
|
34,000
|
||
2014
|
20,000
|
1,2
|
24,000
|
150,000
|
10,000
|
c. The
highest amount of depreciation expense in year 1 (2011) = Declining-Balance Method
The highest amount of depreciation
expense in year 4 (2014) = Straight-Line
Method
The highest total amount over the 4
year period = Total amount depreciation
to use all method is the same for the 4 year period
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