Mary wants to buy horse-carriage that will be used only for buisness and estimated she can buy
Question:
Mary wants to buy horse-carriage that will be used only for buisness and estimated she can buy it for $28,400. Mary would spend additional $3000 to have it painted. As well, she wants the back seat of it removed so that she'll have more room to transport dispenser inventory and beer supplies.
The cost of taking out the back seat and installing shelving units estimated at $1600 and she expects horse-carriage insurance will be $1440. Mary estimates that at the end of the 5 year useful life, and it will sell for $5000.
On November 15, 2021 she made the purchase of horse carriage and it will be ready for use on December 2, 2021. Mary estimates that horse-carriage will be rode as follows: 30000km in 2022, 37500km in 2023, 40000km in 2024, 47500km in 2025, 35000km in 2026 and 19500km in 2027.
Mary is concerned about impact of horsecarriage's cost and related depreciation on GD's statement of income and statement of financial position. she asks you to determine cost of the horse carriage and help her select appropriate depreciation method. She asked you to come up with 3 alternative depreciation methods and prepare the depreciation schedule for all 3. She wonders which method will result in highest profit for year ending May 31, 2023 and over the life of the asset. Mary asks you to prepare annual depreciation journal entries for the first two years under the method that results in the highest profit for fisical 2023.
On December 1, 2023 Mary exchanges the hores carriage plus cash for a new one. The old one has a fair value $19,500. The new one has list price of $50,000 but dealer give Mary $20,000 trade in allowance on the old one. Mary has not recorded any monthly depreciation expense in fiscal 2024. she wants to know what the anticipated journal entry for the above exchange looks like if she'd been using straight line depreciation.
Please answer with explanations and calculations (if involved).
College Accounting A Contemporary Approach
ISBN: 978-0077639730
4th edition
Authors: David Haddock, John Price, Michael Farina