HK Ltd acquired machinery with a cash price of $100,000 under hire purchase terms. HK Ltd made a down payment of $20,000 on 1 September 2019 and settled the balance by 16 equal monthly installments of $5,500 each starting on 1 October 2019. HK Ltd closes its accounts on 31 March each year. The annual allowance rate for the machinery is 30% Which statement concerning the depreciation allowances for the machinery is correct? OA. The machinery will be transferred to the 30% pool in 2020/21. OB. The annual allowance in the year of assessment 2019/20 is $20,460. OC. The annual allowance in the year of assessment 2020/21 is $5,700. OD. No initial allowance will be given in the year of assessment of 2020/21.

HK Ltd acquired machinery with a cash price of $100,000 under hire purchase terms. HK Ltd made a down payment of $20,000 on 1 September 2019 and settled the balance by 16 equal monthly installments of $5,500 each starting on 1 October 2019. HK Ltd closes its accounts on 31 March each year. The annual allowance rate for the machinery is 30% Which statement concerning the depreciation allowances for the machinery is correct? OA. The machinery will be transferred to the 30% pool in 2020/21. OB. The annual allowance in the year of assessment 2019/20 is $20,460. OC. The annual allowance in the year of assessment 2020/21 is $5,700. OD. No initial allowance will be given in the year of assessment of 2020/21.

Name: HK Ltd acquired machinery with a cash price of $100,000 under hire pu
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Description: HK Ltd acquired machinery with a cash price of $100,000 under hire purchase terms. HK Ltd made a down payment of $20,000 on 1 September 2019 and settledthe balance by 16 equal monthly installments of $5,500 each startingon 1. October 2019. HK Ltd cl

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 14P: Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used...

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On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
Refer to the information for Cox Inc. above. What amount would Cox record as depreciation expense for 2019 if the units-of-production method were used ( Note: Round your answer to the nearest dollar)? a. $179,400 b. $184,000 c. $218,400 d. $224,000
Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.
Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual value was 500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: 1. Compute depredation expense (rounded to the nearest dollar) for 2019 and 2020 using the: a. straight-line method b. sum-of-the-years-digits method c. double-declining-balance method 2. Next Level Which method produces the highest book value at the end of 2020? 3. Next Level Which method produces the highest charge to income in 2020? 4. Next Level Over the life of the asset, which method produces the greatest amount of depreciation expense?
Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.
On 1 November 2019, Mushe Limited acquired a machine for N$ 100 000 formanufacturing purposes. The machine was put into use immediately. Payment of thepurchase price will take place on 15 th October 2020. Depreciation is written off at20% per annum according to the straight-line method. Wear and tear are allowed at10% per annum on the reducing balance method and is weighted on a timeproportional basis. The tax rate is 29%. The company reporting date is 31 December 1 November 2019 N$ 1= USD 1.3031 December 2019 N$ 1 = USD 1.2815 October 2020 N$ 1 = USD 1.05 RequiredShow the journal entries for 2019 and 2020 so as to comply with the requirements ofInternational Financial Reporting Standards (IFRS). Journal narrations are notrequired. (Ignore current tax)
Neptune Trading bought a new motor vehicle worth RM350,000 on 1 January 2019. The motor vehicle is to be depreciated at the rate of 10% per annum using the reducing balance method. Question:Prepare the following relating to the above motor vehicle for the years ended 31 December 2019 and 2020.Motor vehicle accountDepreciation accountAccumulated depreciation account
Kiwi company issued a 2.5% promissory note payable in 3 equal annual installments to purchase machinery with a depreciable value of 3,000,000 on October 31, 2021. Interest expense relating to the promissory note was 16,650 for 2021. Unadjusted accumulated depreciation on December 31, 2022 amounted to 100,000. A. How much was the cost of the machinery, How much is the machinery’s salvage value, What was the estimated useful life of the machinery in years? B. How much is adjusted accumulated depreciation on December 31, 2022? C. How much is adjusted depreciation expense on December 31, 2022?
On August 1, 2018, Banco Company purchased a new machine on a deferred payment basis. A down payment of P 100 000 was made and 4 monthly installments of P 250 000 each are to be made beginning on September 1, 2018. The cash equivalent price of the machine was P 950 000. The entity incurred and paid installation costs amounting to P 30 000. What is the amount to be capitalized as cost of the machine?
Alankar Ltd. commenced business on 1st January 2018, when they purchased plant and equipment for 9,00,000. They adopted a policy of charging depreciation at 15% per annum on diminishing balance basis and over the years, their purchases of plants have been as follows01/01/2019 - Rs. 3,50,000 01/01/2022 - Rs. 4,00,000 On 1/1/2022 it was decided to change the method and rate of depreciation to straight line basis. On this date remaining useful life was assessed as 6 years for all the assets purchased before 1/1/2022 with no scrap value and 10 years for the asset purchased on 1/1/2022. Prepare depreciation schedule for 5 years. Books of accounts are closed on 31st December every year.