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On September 1, 2019, Arthur Corporation purchased a new central air conditioning unit for $135,000....

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Accounting

On September 1, 2019, Arthur Corporation purchased a new central air conditioning unit for $135,000. The estimated residual value is $5,000. The generator has a useful life of seven years and the company expects to use it for 20,000 hours, in its total useful life. It was used for 1,900 hours in year 1; 4,800 hours in year 2; 4,750 hours in year 3; 4,550 hours in year 4; 4,000 hours in year 5. Required: (a). Compute the values of Annual Depreciation, Accumulated Depreciation and Book Value for the year 2019, 2020 and 2021, if the company follows: (i). Straight-line Method. (ii). Units-of-activity Method. (iii). Reducing Balance Method (at 30%). (10 marks) (b). Assume that on July 1, 2021, Arthur Corporation plans to sell (dispose) the central air conditioning unit and intends to make a gain of $10,000 from selling the asset. Calculate for how much the central air conditioning unit should be sold for in order to make a gain of $10,000 on disposal of the asset. Assume that the company follows Straight-line Method. (8 marks).

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