amela Company acquired a welding machine on account with an invoice price of P5,000,000 subject to a cash discount of 10% which was not taken. Jamela Company incurred freight and insurance during shipment of P50,000 and testing and installation cost of P150,000. Welding supplies were acquired at a cost of P80,000. The residual value is 10% of its total cost while its estimated useful life is 5 years. What is the cost of the new welding machine? How much is the depreciable amount of the new welding machine? How much is the annual depreciation using the straight line method?

amela Company acquired a welding machine on account with an invoice price of P5,000,000 subject to a cash discount of 10% which was not taken. Jamela Company incurred freight and insurance during shipment of P50,000 and testing and installation cost of P150,000. Welding supplies were acquired at a cost of P80,000. The residual value is 10% of its total cost while its estimated useful life is 5 years. What is the cost of the new welding machine? How much is the depreciable amount of the new welding machine? How much is the annual depreciation using the straight line method?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 5P

See similar textbooks

Similar questions

Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for 120,000 miles. Montello uses the units-of-production depreciation method and in year one it expects to use the truck for 23,000 miles. Calculate the annual depreciation expense.
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.
Jamela Company acquired a welding machine on account with an invoice price of P5,000,000 subject to a cash discount of 10% which was not taken. Jamela Company incurred freight and insurance during shipment of P50,000 and testing and installation cost of P150,000. Welding supplies were acquired at a cost of P80,000. The residual value is 10% of its total cost while its estimated useful life is 5 years. Question: What is the cost of the new welding machine? Please include explanation in each capitalizable costs.
During the current year, Benguet Company purchased a secondhand machine at a price of P300,000. A cash down payment of P50,000 was made and a two-year, non interest bearing note was issued for the balance. Recent transactions involving similar machinery indicate that the used machine has a secondhand market value of P240,000. A new machine would cost P400,000. The following costs were incurred on the machine during the year: Cost of removing the old machine 2,000Cash proceeds form the sale of the old machine 1,200Cost of spare parts purchased and set aside from breakdowns during the first two years of normal use of the machine 20,000Cost of labor to install the machine 4,000Cost of testing the machine prior to use 1,800Cost of hauling the machine from the vendor’s place of business to the company’s premises 5,000Cost of repairing the damage to the machine when it was dropped during the installation 3,000Repairs incurred during the first year of operations 6,000Safety devices added to…
Granite Company purchased a machine costing $121,000, terms 2/10, n/30. The machine was shipped FOB shipping point and freight charges were $2,100. The machine requires special mounting and wiring connections costing $10,100. When installing the machine, $1,600 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.
Abby Corporation acquired a new processing machine. Details of the acquisition are as follows: Invoice cost, terms, 5% discount if payment is made in 30 days. The company did pay within the discount period, P300,000, Cost of transporting the machine to the corporation's factory, P5,000. Cost of installation (which includes additional P2,000 incurred due to negligence of the workers), P11,000. The corporation's chief engineer spent one-fourth of his time during trial runs of the new machine, his monthly salary is P22,000. The company paid P1,000 for removing the old machine. (The old machine was sold for less than its book value.) At what amount should Abby Corporation capitalize the new processing machine?
ALPHA Company purchased equipment on 1/1/N with an invoice price of $80,000. Purchase taxes $16,000. Other costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; fire insurance policy for the factory is, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 5-year useful service life. Required: (b) If the double-declining-balance method of depreciation was used for the machine, prepare the depreciation schedule for the full period. Answer: Depreciation schedule: Year Beginning book value Declining balance rate Annual depreciation expenses Accumulated depreciation Book value 2017 2018 2019 2020 2021
ALPHA Company purchased equipment on 1/1/N with an invoice price of $80,000. Purchase taxes $16,000. Other costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; fire insurance policy for the factory is, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 5-year useful service life. Required: (a)Compute the acquisition cost of the equipment. (b)If the double-declining-balance method of depreciation was used for the machine, prepare the depreciation schedule for the full period. (c) Based on which criteria companies choose the depreciation methods for their depreciable assets?
Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000. Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged It cost $400 to repair this damage. Blake furniture will depreciate this equipment by straight-line method with half-year convention over an estimated useful life of 3 years assuming a $3,000 scrap value. a. The only accurate way to account for the success or failure of an entity is to accumulate alltransactions from the opening of business until the business eventually liquidates. Comment andexplain whether this is true or not. Moreover, how do you think the concept of consistency aidin the analysis of financial statements? What type of accounting disclosure is required if thisconcept is not applied?
Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000. Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged It cost $400 to repair this damage. Blake furniture will depreciate this equipment by straight-line method with half-year convention over an estimated useful life of 3 years assuming a $3,000 scrap value. a. Do you agree that depreciation is often considered as major source of funds? Why? b. Which tangible assets are depreciated and which are not, why? c. A rental agency collects rent in advance. Why the rent is collected treated as a liability/asset? Inwhich category this liability/asset will be classified into and how would you record it? Where should it appear in the financial statements? d. The only accurate way to…
SSG bought a machine for $40,000 in January 19W8. The machine had an expected useful life of six years and an expected residual value of $10,000. The machine was depreciated on the straight-line basis. In December 20X1, the machine was sold for $15,000. The company has a policy in its internal accounts of combining the depreciation charge with the profit or loss on disposal of assets. The total amount of depreciation and profit/loss charged to the internal income statement over the life of the machine was $ ........................................
GRACE Co. recently acquired two items of equipment. Acquired a press at an invoice price of P5,000,000 subject to a 5% cash discount which was taken. Costs of freight and insurance during shipment were P50,000 and installation cost amounted to P200,000. The cost of testing the equipment is P50,000 while the administration cost has amounted to P30,000. Acquired a welding machine at an invoice price of P3,000,000 subject to a 10% cash discount which was not taken. Additional welding supplies were acquired at a cost of P100,000. Required: What is the total increase in the equipment account as a result of the transactions?