Schrade Company bought a machine for $96,000 cash. The estimated useful life was four years, and the
Question:
Schrade Company bought a machine for $96,000 cash. The estimated useful life was four years, and the estimated residual value was $6,000. Assume that the estimated useful life in productive units is 120,000. Units actually produced were 43,000 in year 1 and 45,000 in year 2.
Required:
1. Determine the appropriate amounts to complete the following schedule. Show computations, and round to the nearest dollar.
2. Which method would result in the lowest EPS for year 1? For year 2?
3. Which method would result in the highest amount of cash outflows in year 1? Why?
4. Indicate the effects of
(a) Acquiring the machine and
(b) Recording annual depreciation on the operating and investing activities sections of the statement of cash flows (indirect method) for year 1 (assume the straight-linemethod).
Depreciation Expense for Year 2 Year 1 Net Book Value at the End of Year 1 Method of Depreciation Year 2 Straight-line Units-of-production Double-declining-balance
Step by Step Answer:
1 Depreciation Expense Book Value at End of Method of Depreciation Year 1 Year 2 Year 1 Year 2 Strai...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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