Indicate the best answer for each question in the space provided. Use the follow
ID: 2412768 • Letter: I
Question
Indicate the best answer for each question in the space provided. Use the following data for the four independent questions which follow: On 5 May 2010, Lloyd purchased a machine for $84,000. The estimated life of the machine was 10 years, with an estimated residual value of $10,000. The service life in terms of "output" is estimated at 8,000 hours of operation. er to the above data. Assume Lloyd uses straight-line depreciation with the half-year convention. Depreciation expense to be recognized in 2010 (the year of purchase) is: a $7,400. b $8,400. S3,700. d Some other amount 1 Ref 2 Assume Lloyd uses 200% declining balance depreciation with the half- Refer to the data above. year convention Depreciation expense to be recognized in 2011 (the second year of ownernship) is: $8,400. b $13,120. S15,120. d Some other amount. Refer to the data above Assume Lloyd uses 150% declining balance depreciation with the half- year convention. Depreciation expense to be recognized in 2010 (the year of purchase) is: a $8,400. b $6,300.c $12,600. d Some other amount 4 Refer to the data above. Assume Lloyd uses the units-of-output method, and that the machine was in operation for 1,000 hours in 2010 and 1,800 hours in 2011. The book value of the machine at 31 December 2011 is: 4 $48,100. b $58,100. c $25,900. d Some other amount.Explanation / Answer
1. Option C is correct
SLM Depreciation = ($84000-$10000/10)*1/2 = $7400/2 = $3700
2.200% DDB
First for year 2010 = $84000* (1/10*200%) *1/2 = $8400
For 2011 DDB(200%) = ($84000-8400)*20% = $15120
Option C is correct.
3.150% declining balance method
2010 Depreciation = $84000*(1/10*150%)*1/2
= $6300
Option B is correct
4. To calculate book value in 2011, we need to calculate the depreciation expenses of 2010 and 2011 as below
Depreciation under units of output method (2010) = ($84000-$10000)*(1000/8000) = $9250
Depreciation under units of output method (2011)=($84000-$10000)*(1800/8000) = $16650
Book value on december 31,2011= $ 84000-$9250-$16650 = $58100
Option B is correct.