On January 1,2010, Bumper acquired a machine at a cost of $41,000. The machine\'
ID: 2493614 • Letter: O
Question
On January 1,2010, Bumper acquired a machine at a cost of $41,000. The machine's estimated useful life was 10 years with a $1,000 salvage value. Straight-line depreciation method was used for depreciation. On June 14, 2016, Bumper realized that the machine should have been assigned a 11 year life when purchased in 2010 and have changed the estimate for salvage value to $1,500. For 2016, Bumper should record depreciation expense of: Jennings Advertising Inc. reported the following on its December 31,2015,balance sheet: Equipment $500,000 Accumulated depreciation $135,000 In a footnote, Jennings indicated that it uses straight-line depreciation over 10 years and estimates salvage value as 10% of cost. What is the average age of the equipment owned by Jennings? A schedule of machinery owned by Jones is shown below: Cost Salvage Value Life in 10 years Machine X $275,000 $25,000 10 Machine Y $100,000 $10,000 8 Machine Z $20,000 $2,000 4 Jones computes depreciation by using the group depreciation method on a straight-line basis. Based on the information presented, the composite life (in years)of these assets should be:Explanation / Answer
Books of Bumper Depreciation already charged till FYE 2015 24000 Depreciation could have been charged till FYE 2015 if salvage value is 1500 Machine cost 41000 Salvage value 1500 Life, remain same 10 Years Depreciation p.a. 3950 Depreciation till FYE 2015 23700 Depreciation for 2016 3950 Depreciation charged excess till FYE 2015 300 Depreciation to be charged during FYE 2016 3650 Books of Jennings Advertising Inc. Depreciation Method Straight Line Life 10 Years Value of equipment 500000 Accumulated Depreciation 135000 Salvage 50000 Depreciation p.a. 45000 Life already expired, years 3 So Average age of equipment owned by Jenning is 3 Years Books of Jones Machine X Y Z Total Cost 275000 100000 20000 395000 Salvage 25000 10000 2000 37000 Net Depreciatiable Value 250000 90000 18000 432000 Life in years 10 8 4 Depreciation per year 25000 11250 4500 40750 Composite rate, %, Weghted Average 10.32 Composite Life, years 432000/40750= 10.6