Question
Zulaga Sales acts as sales representative for a number of small companies. The owner of the company has decided to change from leased vehicles to
Zulaga Sales acts as sales representative for a number of small companies. The owner of the company has decided to change from leased vehicles to company-owned vehicles for its sales representatives. On July 1, 20x2, the company plans to purchase 5 vehicles at a cost of $33,600 each. Each vehicle has an estimated residual value of $4,500, a useful life of 6 years, and will be driven a total of 150,000 kilometres. Luis, the owner of the company, would like to choose a depreciation method that will result in the lowest depreciation expense for the year ended June 30, 20x3. |
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Luis has also decided to provide the companys 5 sales representatives with new computers. Luis has found someone willing to buy the 5 old computers now, for a total of $2,500 cash. The 5 old computers have a total cost of $25,000 and total accumulated depreciation of $20,000, after recording depreciation expense up to June 28, 20x2. |
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Required - |
a. Calculate the first years total depreciation expense on the new vehicles, assuming the company chooses to use the straight-line method of depreciation. |
b. Calculate the first two years total depreciation expense on the new vehicles, assuming the company chooses to use the diminishing balance method of depreciation at the rate of 33%. |
c. Calculate the first years total depreciation expense on the new vehicles, assuming the company chooses to use the units-of-production method of depreciation and the 5 new vehicles are expected to be driven a total of 75,000 kilometres in the year ended June 30, 20x3. |
d. Prepare the journal entry that would be made to record the sale of the old computers, assuming they are sold for a total of $2,500 cash. |
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