answer question 10

Question 9 (6 Marks) Beside each of the following items identify whether the costs should be a capital expenditure (CE) or a revenue expenditure (RE) $4000 spent to replace tires on truck $4000 spent to majorly overall a truck which extends the useful life $400 spent to tune-up a truck $100,000 spent to relocate company headquarters $15,000 spent to reinstall machinery __$500,000 spent for an addition to a building Question 10 (7 Marks) Murphy Company acquired machinery at the beginning of year 1. The machinery has a useful life of years. The following is schedule of the depreciations IF the company uses straight line depreciation OR IF the company uses double declining depreciation Double- Year Straight Line Declining $12,000 $30,000 $12,000 $18,000 $12,000 $10.800 $12,000 $1,200 $12,000 Total $60,000 $60,000 SO a) What is the cost of the asset being depreciated? b) What amount (if any) was used as the residual value in the calculations? c) Which method will provide the highest net income in year 1? d) Which method will provide the larger expense in year 47 e) Which method will produce the higher carrying amount for the asset at the end of year 3? f) Which method will produce the higher cash flow in year 4? 2) If the asset were sold at the end of year 3, which method would yield the higher gain (or lower loss) on disposal of the asset