ACC121Assessment-Comp Prob2-set2-w-s2016

ACC121Assessment-Comp Prob2-set2-w-s2016

You will work on this problem on your own time. When completed your work will be submitted to your instructor through an Assignment Link provided in the Weekly Folder for Seminar 6.

Problem: The Pablo Paving Company purchased a new bulldozer for $ 250,500 at the beginning of Year 1. It is estimated that the residual value will be 25,000 and have a useful life of 6 years. The Bulldozer is expected to last 10,000 hours. In year 1 it was used 1,800 hours, in year 2 it was used 2000 hours; year 3, 2,500 hours; 1,500 hours in year 4; 1,200 hours in year 5; and 1,000 hours in year 6.

Required:

1) Compute the annual depreciation and carrying value for the new crane for each of the 6 years under each of the following methods: a) Straight-line, b) production, c) double declining- balance. Round percentage to 2 decimal places (for example, like this: 22.22 %).

2) If the crane is sold for $ 250,000 at the end of year 3, what is the gain/loss under each of the three methods?

3) How does each method affect the firm’s profitability? Please explain this as clearly as possible.

For requirement 1, set up the problem like this:

Method of Depreciation: a) Straight line _________

Depreciable amount: ________________________

Year    Annual Depreciation Expense                        Annual Depreciation Expense         carrying value

1         ______________________________           _______________                     ____________

2       ______________________________             _______________                              ____________

3       ______________________________             _______________                     ____________

4       ______________________________             _______________                     ____________

5       ______________________________           _______________                    ____________

6       ______________________________           _______________                     ____________

 

 

 

 

 

Method of Depreciation _b) Production Method______                                           page 2 of 2

Depreciable amount______________________

Year                Annual Depreciation                 Accumulated Depreciation                   Carrying Value

1                     _____________________         ______________________                 ____________

2                    _____________________         ______________________                 _____________

3                     _____________________         ______________________                 _____________

4                     _____________________          ______________________                 _____________

5                     _____________________           ______________________               ______________

6                     _____________________           ______________________               ______________

Method of Depreciation _c) _Double Declining Balance

Depreciable amount _______________________

Year                  Annual Depreciation               Accumulated Depreciation                 Carrying Value

1                         _____________________         _______________________               ______________

2                       _____________________         _______________________             ______________

3                     ______________________         _______________________              ______________

4                     ______________________         _______________________             ______________

5                     ______________________         _______________________             ______________

6                      ______________________         ______________________               ______________

For requirement 2, set up the problem like this:

Year 3       Accumulated Depreciation           Carrying Value         Selling Price       Gain/Loss

Method a)        _________________           ____________         __________       ________

Method b) _____________________           ____________         __________       _________

Method c) _____________________           ____________         ___________     _________

Item 3) ____________________________________________________________________

_____________________________________________________________________

_____________________________________________________________________

_____________________________________________________________________

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