Business Finance
Book value accounting problem

### Question Description

I don’t understand this Accounting question and need help to study.

i just need help with requirement 3 part a. here are pics u will need

http://imgur.com/wPk5fQA

http://imgur.com/DiV6wpC

pic 1 is the info you need to solve the problem. pic 2 is the problem that needs to be solved

please show how u got the answer

thanks

Student has agreed that all tutoring, explanations, and answers provided by the tutor will be used to help in the learning process and in accordance with Studypool's honor code & terms of service.

## Final Answer

Cost = \$42,000

Estimated life = 5 years (or) 200,000 hours

Salvage hours = \$2,000

Company A: Straight-line depreciation

Depreciation expense every year = (Cost – Salvage value)/Estimated life

( (\$42,000 - \$2,000)/5 years

( \$8,000 per year

Therefore, Depreciation expense for:

2008: \$8,000

2009: \$8,000

2010: \$8,000

2011: \$8,000

2012: \$8,000

Company-B: Double-declining balance method

Depreciation expense = Beginning of the year balance x Double-declining rate

Double declining rate = Straight line rate x 2 = 20% (for 5 years life) x 2 = 40%

2008: \$42,000 x 40% ( \$16,800

2009: (\$42,000 - \$16,800) x 40% ( \$10,080

2010: (42,000-16,800-10,080) x 40% ( \$6,048

2011: (42,000-16,800-10,080-6,048) x 40% ( 3,628.80

2012: (42,000-16,800-10,080-6,048-3,628.80) x 40% + Adjustment ( \$3,443.20

Note: The actual calculation in the last year works out to \$2,177.28. But the net book value at the end of Year 5 should be equal to its salvage cost, \$2,000. During the 1st 4 years, the total depreciation expense was 16,800+10,080+6,048+3,628.80 ( 36,556.80. The balance amount to be depreciated in year 5 would be \$40,000 - \$36,558.80 ( \$3,443.20

Company C: Units of production method

Depreciation expense per hour = (\$42,000 - \$2,000)/200,000 hours ( \$0.20 per hour

Depreciation expense for:

2008: 50,000 hours x \$0.20 per hour ( \$10,000

2009: 55,000 hours x \$0.20 per hour ( \$11,000

2010: 40,000 hours x \$0.20 per hour ( \$8,000

2011: 44,000 hours x \$0.20 per hour ( \$8,800

2012: 31,000 hours x \$0.20 per hour – Adjustment ( \$2,200

Note: The actual calculation for 2012 is \$6,200. But the book value should not go below the salvage value. The total depreciation expense charged till 2011 works out to \$37,800 (10,000 + 11,000 + 8,000 +8,800). The balance to be depreciated is \$2,200 (40,000 – 37,800).

hinanoureen (1599)
UT Austin
Review

Anonymous
Thanks for the help.

Anonymous
Outstanding. Studypool always delivers quality work.

Anonymous
Tutor was very helpful and took the time to explain concepts to me. Very responsive, managed to get replies within the hour.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors