Peter M. Dell Co. purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time

E22-11 (Change in Estimate—Depreciation) Peter M. Dell Co. purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2008, it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time.

Instructions
(a) Prepare the entry (if any) to correct the prior years’ depreciation.
(b) Prepare the entry to record depreciation for 2008.

Click here for the solution: Peter M. Dell Co. purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time

The following data are accumulated by Reynolds Company in evaluating the purchase of $104,000 of equipment, having a four-year useful life

EX 10-7 The following data are accumulated by Reynolds Company in evaluating the purchase of $104,000 of equipment, having a four-year useful life:

Net income net cash flow
Year 1 $38,000 $64,000
Year2 $23,000 $49,000
Year 3 $11,000 $37,000
Year 4 (1,000) $25,000

a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the table of the present value of $1 appearing in Exhibit 1 of this chapter.
b. Would management be likely to look with favor on the proposal?

Click here for the solution: The following data are accumulated by Reynolds Company in evaluating the purchase of $104,000 of equipment, having a four-year useful life

A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is eight years

A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is eight years.

Instructions:
Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used
a) straight-line for 2010
b) Double-declining balance for 2011
c) Sum-of-the-years digits for 2011


Click here for the solution: A machine cost $500,000 on April 1, 2010

How does a product's life cycle stage influence production cost management?

How does a product's life cycle stage influence production cost management?


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Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class

Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, its after tax cash flows would be the following: (Year 1) - 6,339; (Year 2) -4,764; (Year 3)-9,943; (Year 4) -5,640; all occurring at the end of respective years. The lease terms, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%. Should the firm lease or buy?

Click here for the solution: Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class