Spring 2020 - BUS2101 - Chapter 8 Homework Homework should always be hand-written (do not type). You are encouraged to use journal paper for journal entries (Questions through 8). Colors are optional, but encouraged, for this homework Question 1) Grimes Corporation purchased machinery on January 1, 2020, at a cost of $250,000. The estimated useful life of the machinery is 5 years, with an estimated salvage value at the end of that period of S30,000. The company is considering different depreciation methods that could be used for financial reporting purposes. Instructions: A) Prepare separate depreciation schedules (as shown in lecture) for the machinery using the straight line method, and the double-declining balance method (Round to the nearest dollar.) B) Which method would result in the higher reported 2020 income? In the highest total reported income over the 5-year period? C) Which method would result in the lower reported 2020 income? In the lowest total reported income over the 5-year period? Question 2) Patterson Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on May 1, 2020, at a cost of $100,000. Over its 4-year useful life, the bus is expected to be driven 160,000 miles. Salvage value is expected to be S2,400. Instructions: Prepare a depreciation schedule (as shown in lecture) assuming actual mileage was: 2020, 40,000; 2021, 52,000: 2022, 41,000, and 2023, 27,000. Question 3) On November 1, 2020. Amanda Company acquired real estate, on which it planned to constructa small office building, by paying $97,500 in cash. An old warehouse on the property was demolished at a cost of $27,555; the salvaged materials were sold for $8,888. Additional expenditures before construction began included $1,900 attorney's fee for work concerning the land purchase, 55,200 real estate broker's fee, S10,100 architect's fee, and $25,000 to put in driveways and a parking lot. Instructions: A) Determine the amount to be reported as the cost of the land. B) For each cost not used in part (a), indicate the account to be debited. Question 4) In recent years, Dobbs Company has purchased three machines. Because of a bad employee named Wares in the accounting department, a different accountant was hired to take charge of selecting the depreciation method for each machine. Information concerning the machines is summarized in the table below. Machine Acquired Cost Jan 1, 2019 Oct. 1, 2020 Nov. 1, 2020 596,000 $80,000 $66,000 Salvage Value S12.000 S10,000 $ 6,000 Useful Life Depreciation (in years) method Straight-line Double-Declining Balance Units-of-Activity For the units-of-activity method, total machine hours are expected to be 30,000. Actual hours of use in the first 3 years were: 2020, 800: 2021, 4.100; and 2022, 7,000. Instructions: A) Compute the amount of accumulated depreciation on cach machine at December 31, 2022 B) If machine 2 was purchased on April 1 instead of October 1, what would be the depreciation expense for this machine in 2020? In 2021