Develop a response in either Word or Excel and follow the instructions outlined in the Assignments Menu for submission.
A. Cheyenne Company purchased a machine on January 1, 2013, for $65,000. The estimated life is 8 years and the estimated salvage value is $5,000. The machine has an estimated service life of 48,000 hours. In 2013, 6,900 hours were used.
REQUIRED:
Compute the depreciation to be recorded for the year ending December 31, 2013 using the:
1. Straight-line method
2. Production hours method
3. Sum-of-the years' digits method
4. Double-declining balance method
B. Presented below is information related to equipment owned by Swiss Company at December 31, 2013:
|
Cost
|
$9,000,000
|
|
Acc. depreciation to date
|
1,000,000
|
|
Expected undiscounted future cash flows
|
7,000,000
|
|
Fair Value
|
4,800,000
|
Assume that Swiss Company will continue to use the asset in the future. As of December 31, 2013, the equipment has a remaining useful life of 4 years and Swiss uses the straight line method of depreciation.
REQUIRED:
1. Prepare the journal entry to record the impairment at December 31, 2013.
2. Prepare the journal entry to record depreciation expense for 2014.
3. Prepare the journal entry (if any) necessary to record the increase in fair value to $5,100,000 as of December 31, 2014.
4. Would your answer to (3) be different if Swiss intended to dispose of the equipment rather than use it in the future?