Answer E.18
A pomen were as Book value of truck ton cout of now the content whose Walushould be to the tractor and the war why Per the Cost of Aspire Inc. replaced in trand-dolly System of moving inven and its plant without controlled cover the cold with this equipment Purchase price of The truck-and-dolly old for up for DDO. What a shod became to the balance her of Empire the heat the new concorsomt Why ET Calculating Repair and Maintenance Expenses. The Walown Cement Company made the following expondres relating to its plans oquipe IT Computing Depreciation Expense. Equipment costing 5790.000, with an expected cap value of 50.000 B DOO 20 000 52.300.000 40.000 225.000 Overhauled several machines at an aggregate cost of 5315.000 to improve the efficiency of the equipment over its retaining selle Replaced a broken driveshaft on a forklift at a com of $34.000 Completed regularly scheduled repairs at a cost of $99.000 Installed a foam roof on the plant over the existing, but leaking Natrolled roof at a cost of $410,000 What amount should be expensed as repain and maintenance? Why? TA und an estimated useful life of five years, was purchased on January 1 of the current year. Calculate the dopro ciation expense for the five years of the asset's useful life using cay the straight-line method and (b) the double- declining-balance method. Which method would you prefer to use for (a) income tax purposes and (b) financial reporting purposes? Why? Es Full Cost versus Successful Efforts Method. During the current year, The Culgary Oil & Gas Company bogan an exploration project in Montana. The company had paid $1.500.000 for the drilling rights on a tract of 500 acres of land. The company then spent another $180,000 building roads and containment ponds. The project called for eight exploratory wells to be drilled at an expected cost of $130,000 per well. The first eight wells drilled were found to be dry (lacking commercially viable quantities of oil or gas); however, both the ninth and tenth wells drilled contained commercially viable quantities of oil condensate. Consequently. two additional development wells were drilled at a cost of S140,000 per well. Calculate the capitalized cost of Calgary's oil reserves under (a) the full cost method and (b) the successful efforts method. Which method should the company adopt for income tax reporting purposes? Which method should the company use when reporting its financial results to its shareholders? Why? 39 Calculating Accelerated Depreciation Equipment costing S820,000, with an expected useful life of twelve yours and an expected salvage value of $35,000, was purchased at the beginning of the year. Calculate the depreciation expense for the first five years using (a) the sum-of-the-years' digits method and (b) the double- declining-balance method. Which method would you prefer to use for (a) income tax purposes and (b) finan cial reporting purposes? Why
