The Fraser River Corporation has purchased a new piece of factory equipment on January 1, 2018, and
Question:
The Fraser River Corporation has purchased a new piece of factory equipment on January 1, 2018, and wishes to compare three depreciation methods: straight-line, double-declining-balance, and units-of-production.
The equipment costs $400,000 and has an estimated useful life of four years, or 8,000 hours. At the end of four years, the equipment is estimated to have a residual value of $20,000.
Requirements
1. Use Excel to prepare depreciation schedules for straight-line, double-declining-balance, and units-of-production methods. Use cell references from the Data table.
2. Prepare a second depreciation schedule for double-declining-balance method, using the Excel function DDB. The DDB function cannot be used in the last year of the asset’s useful life.
3. At December 31, 2018, Fraser River is trying to determine if it should sell the factory equipment. Fraser River will only sell the factory equipment if the company earns a gain of at least $6,000. For each of the three depreciation methods, what is the minimum amount that Fraser River will sell the factory equipment for in order to have a gain of $6,000?
Step by Step Answer:
Horngrens Financial And Managerial Accounting The Financial Chapters
ISBN: 9780134486840
6th Edition
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura