Answered step by step
Verified Expert Solution
Question
1 Approved Answer
So basically, the depreciable cost of the asset is the cost + any expenses required to get it ready for use. Since delivery and installation
So basically, the depreciable cost of the asset is the cost + any expenses required to get it ready for use. Since delivery and installation are needed to get it ready for use, we add those costs but we ignore the insurance.
Secondly, for the same question, since the machine is only being used after April 30, they are only going to use it for 8 months out of the year in year 1. So multiply the depreciation expense in year 1 by 8/12 to reflect depreciation calculation for 8 months out of the first year.
Pharoah Limited purchased a machine on account on April 1, 2024, at an invoice price of $356,620. On April 2, it paid $2,130 for delivery of the machine. A one-year, $3,970 insurance policy on the machine was purchased on April 5. On April 19, Pharoah paid $7,590 for installation and testing of the machine. The machine was ready for use on April 30. Pharoah estimates the machine's useful life will be five years or 6,212 units with a residual value of $73,690. Assume the machine produces the following numbers of units each year: 896 units in 2024;1,400 units in 2025; 1,405 units in 2026; 1,396 units in 2027 ; and 1,115 units in 2028. Pharoah has a December 31 year end. Assume that the company, after recording depreciation using the straight-line method, for the first four months of 2026 , determined on May 1, 2026 that the machine could be operated for one more year than originally estimated. Because of this, the residual value at the end of this revised useful life would now be $54,007. Calculate the depreciation expense to the end of the useful life. anlaintathn dammanintian numanmatathannd aft he useful life
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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