Depreciation ComputationReplacement, Nonmonetary Exchange Goldman Corporation bought a machine on June 1, 2008, for $31,800, f.o.b. the


Depreciation Computation—Replacement, Nonmonetary Exchange Goldman Corporation bought a machine on June 1, 2008, for $31,800, f.o.b. the place of manufacture. Freight to the point where it was set up was $200, and $500 was expended to install it. The machine’s useful life was estimated at 10 years, with a salvage value of $2,500. On June 1, 2009, an essential part of the machine is replaced, at a cost of $2,700, with one designed to reduce the cost of operating the machine. The cost of the old part and related Depreciation cannot be determined with any accuracy. On June 1, 2012, the company buys a new machine of greater capacity for $35,000, delivered, trading in the old machine which has a fair market value and trade-in allowance of $20,000. To prepare the old machine for removal from the plant cost $75, and expenditures to install the new one were $1,500. It is estimated that the new machine has a useful life of 10 years, with a salvage value of $4,000 at the end of that time. The exchange has commercial substance. Assuming that Depreciation is to be computed on the straight-line basis, compute the annual Depreciation on the new equipment that should be provided for the fiscal year beginning June 1, 2012.

Depreciation is an important concept in accounting. By definition, depreciation is the wear and tear in the value of a noncurrent asset over its useful life. In simple words, depreciation is the cost of operating a noncurrent asset producing...
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-0470423684

13th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield

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