On January 7, Red Tucker, Inc. paid $254,700 for equipment used in manufacturing automotive supplies. In addition
Question:
On January 7, Red Tucker, Inc. paid $254,700 for equipment used in manufacturing automotive supplies. In addition to the basic purchase price, the company paid $500 transportation charges, $300 insurance for the equipment while in transit, $12,000 sales tax, and $2,500 for a special platform on which to place the equipment in the plant. Red Tucker, Inc. management estimates that the equipment will remain in service for five years and have a residual value of $30,000. The equipment will produce 60,000 units the first year, with annual production decreasing by 5,000 units during each of the next four years (i.e., 55,000 units in year 2, 50,000 units in year 3, and so on for a total of 250,000 units). In trying to decide which depreciation method to use, Red Tucker, Inc. requested a depreciation schedule for each of the three depreciation methods (straight-line, units-of-production, and double-declining-balance).
Requirements
1. For each depreciation method, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. For the units-of production method, round depreciation per unit to three decimal places.
2. Prepare the balance sheet disclosure for Red Tucker’s equipment at December 31 of the first year.
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Financial Accounting
ISBN: 978-0132889711
1st Canadian Edition
Authors: Jeffrey Waybright, Liang Hsuan Chen, Rhonda Pyper