Question
Redlands, Inc. purchased equipment on January 1, 2011 for $330. Management assumes the equipment will last ten (10) years and will have a $30 residual
Redlands, Inc. purchased equipment on January 1, 2011 for $330. Management assumes the equipment will last ten (10) years and will have a $30 residual value at the end of its useful life.
Straight-Line Depreciation
Annual depreciation expense reported on the 2011 and 2012 income statements:
2011 $________________ 2012 $_________________
Balance Sheets
| 2011 | 2012 |
Historical cost | $330 | $330 |
Less: accumulated depreciation |
|
|
Net (book or carrying) value |
|
|
Double-Declining Balance Depreciation
Compute the straight-line depreciation rate:
Double the straight line rate:
Year | Book Value1/1 | Depr. Rate | Depr. Expense (I/S) | Book Value12/31 |
2011 |
|
|
|
|
2012 |
|
|
|
|
Balance Sheets
| 2011 | 2012 |
Historical cost | $330 | $330 |
Less: accumulated depreciation |
|
|
Net (book or carrying) value |
|
|
Part 2
Assume the same data in part 1 above except that Redlands purchased the equipment on September 1, 2011. Redlands depreciates its equipment to the nearest whole month (1/12 of the year). The firms fiscal year begins on January 1 and ends on December 31.
Straight-Line Depreciation
Annual depreciation expense reported on the 2011 and 2012 income statements:
2011 $________________ 2012 $_________________
Balance Sheets
| 2011 | 2012 |
Historical cost | $330 | $330 |
Less: accumulated depreciation |
|
|
Net (book or carrying) value |
|
|
Double-Declining Balance Depreciation
Compute the straight-line depreciation rate:
Double the straight line rate:
Year | Beg. Book Value | Depr. Rate | Depr. Expense (I/S) | Book Value12/31 |
9/1/11-12/31/11 |
|
|
|
|
1/1/12-12/31/12 |
|
|
|
|
Balance Sheets
| 2011 | 2012 |
Historical cost | $330 | $330 |
Less: accumulated depreciation |
|
|
Net (book or carrying) value |
|
|
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