Question $4$

On January $1,20$X$2,$ The GenKota Winery purchased a new bottling system. The system has an

expected life of $5$ years. The system cost $$325,000.$ Shipping, installation, and set up were an

additional $$35,000.$ At the end of the useful life, Julie Hayes, chief accountant for GenKota,

expects to dispose of the bottling system for $$26,000.$ She further anticipates total output of

$668,000$ bottles over the useful life. The output for $20$x$2$ was $108,000$ bottles, $130,000(20$x$3),$

$150,000(20$X$4),160,000(20$X$5),$ and $120,000(20$X$6).$

i$)$ Prepare depreciation schedules assuming use of the:

$($a$)$ straight$-$line depreciation method

$($b$)$ units$-$of $-$production depreciation method

$($c$)$ double$-$declining balance depreciation method

$3$

Question $5$

Purdue Company purchased equipment on April $1,2012$ for $$270,000$ cash. The equipment was

expected to have a useful life of $3$ years or $18,000$ operating hours and a residual value of $$9,000.$

The equipment was used for $7,500$ hours during $2012,5,500$ in $2013,4,000$ hours in $2014$ and

$1,000$ hours in $2015.$

i$)$ Prepare the journal entries to record the purchase of the equipment on April $1,2012$

ii$)$ Determine the depreciation expense for the years ended December $31,2012,2013,2014$

and $2015$ by $($a$)$ the straight$-$line method, $($b$)$ the unit$-$of$-$production method & $($c$)$ the

double$-$declining method.

iii$)$ Prepare the balance sheet extract for $2012,2013,$ and $2014$

Question $6$

On January $1,20$X$5,$ a company purchased a new machine for $$130,000.$ They expected to use

the machine for $5$ years, down to a residue of $$6,500.$

i$)$ Prepare the journal entry necessary to record the purchase of the equipment.

ii$)$ What is the book value of the equipment on December $31,20$X$6$ if the company

uses the straight$-$line method of depreciation?

iii$)$ If the company uses the double declining balance method of depreciation, what

is the depreciation expense for $20$X$6?$

iv$)$ The company uses the straight$-$line method of depreciation and sells the equipment for

$$30,000$ at the end of $4$ years. State the journal entries to record the sale.

Assume the company uses the straight$-$line method of depreciation. After recording two full

years of depreciation, they decide that the machine will last a total of $6$ years, rather than $5.$

Residual value at the end of $6$ years will be $$8,000.$ What is the $20$X$7$ depreciation expense?