On January 1, 2022, Welch Auto Rentals purchased a new automobile for $80,000 to add to its fleet of rental cars. The automobiles are rented out on a short-term basis with rental fees calculated based on distance driven by the customer. Welch's policy is to sell and replace a car after the earlier of 4 years, or 95,000 kilometers. The average selling price (salvage value) of the used cars is $20,000. This particular car was driven 32,000 km in 2022. The company's fiscal year is from Jan1 - Dec 31^st.

Instructions

a. Calculate 2022 depreciation expense under each of the following methods:(6 marks)

(i) Straight-line

(ii) Double -Diminishing-balance. (You will need to calculate the percentage rate using the time of 4 years)

(iii) Units-of-production

b. Which method will best match the estimated pattern in which the asset's economic benefits are expected to be consumed? Explain.(2 marks)

Show you work here

Straight Line	Double Diminishing(declining) Balance	Units - of - Production
5

QUESTION 3 - DISPOSAL OF EQUIPMENT (8 MARKS)

Allteak Paper Products sold their machine in 2022. The following information pertains to the machine (year-end is Dec. 31):

Purchase Useful Residual Depreciation Sales

Machine Cost Date Life Value Method Date Sold Price

#1 $90,000 Sept. 1/20195 yrs. $10,000 Straight-line Jan.1/2022 $40,000

Instructions

1. Calculate the accumulated depreciation on the machine at the date of disposal. Show the total depreciation as well as the amount for each year (No journal entries are required, just show your calculations).(4 marks)

1. Prepare the journal entry required on Jan. 1, 2022 to record the sale of the machine for $40000. (Steps - calculate the NBV of the equipment of the date of sale, then calculate the gain or loss on the sale of the equipment, thenprepare the journal entry for the sale of the machine) (4 marks)

Question 4 - Mining Depletion Rate - 8 Marks

McGuinness Mining Company purchased land containing an estimated 11 million tonnes of ore at a cost of $16,000,000. The land without the ore is estimated to be worth $750,000. The company expects to operate the mine for 10 years. Buildings costing $700,000 are erected on the site and are expected to last for 15 years. Equipment costing $1,300,000 with an estimated life of 15 years is installed. However, the buildings and the equipment will possess no residual value after the mine is closed. During the first year of operations, the mining company mined and sold 1 million tonnes of ore.

Instructions

1. Calculate the depreciation cost per tonne of the mine.

1. Calculate the depreciation expense for the first year on the mine.

1. Calculate the appropriate first year's depreciation expense for the buildings using straight-line.

1. Calculate the appropriate first year's depreciation expense for the equipment using straight-line.

Answer rating: 100% (QA)

a Welch Auto Rentals Depreciation Calculations for 2022 i Straightline Cost 80000 Estimated useful l... View the full answer