Answered step by step
Verified Expert Solution
Question
1 Approved Answer
BAT 4M1 Amortization Methods Name: Date: Score: 718 On January 15, 2002, the Grind Company purchased a machine for its production process. The cash price
BAT 4M1 Amortization Methods Name: Date: Score: 718 On January 15, 2002, the Grind Company purchased a machine for its production process. The cash price of the machine was $35,000. Related expenditures included shipping costs, $175; insurance during shipping, $75; installation and testing costs; 950; and S90 of oil and lubricant costs to be used on the machinery during its first year of operations, Grind estimates that the useful life of the machine is four years with a residual value of $5,000. In terms of activity, it estimates the useful life of the machine to be 25,000 units. Actual usage is as follows: for 2002, 6,500 units; for 2003, 7,500 units; for 2004, 6,000 units; and for 2005, 5,000 units. 1. Determine the capital cost of the machine on January 1, 2002. 2. Calculate the amount of amortization expense that Grind should record during each year of the machines 4 year useful life, using: a) the straight line method year to date year to date Year Amortizable Amortization Amortization Accumulated Net book cost rate expense Amortization value 2002 2003 2004 2005 b) the declining balance method at twice the straight line rate Year Beginning NBV Amortization Amortization rate expense year to date Accumulated Amortization year to date Net book value 2002 2003 2004 2005 c) the units of activity method Year Units-of- Activity Amortizable cost per unit Amortization expense year to date Accumulated Amortization year to date Net book value 2002 2003 2004 2005
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started