Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at...

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Accounting

Swanson & Hiller, Inc., purchased a new machine on September1 of the current year at a cost of $108,000. The machine’sestimated useful life at the time of the purchase was five years,and its residual value was $8,000. The company reports on acalendar year basis.

Required:
a-1. Prepare a complete depreciation schedule,beginning with the current year, using the straight-line method.(Assume that the half-year convention is used).
a-2. Prepare a complete depreciation schedule,beginning with the current year, using the 200 percentdeclining-balance method. (Assume that the half-year convention isused).
a-3. Prepare a complete depreciation schedule,beginning with the current year, using the 150 percentdeclining-balance, switching to straight-line when that maximizesthe expense. (Assume that the half-year convention is used).
b. Which of the three methods computed in parta is most common for financial reporting purposes?
c. Assume that Swanson & Hiller sells themachine on December 31 of the fourth year for $29,000 cash. Computethe resulting gain or loss from this sale under each of thedepreciation methods used in part a.

Answer & Explanation Solved by verified expert

3.6 Ratings (628 Votes)

a1 Straight line method Depreciation expense Purchase cost of asset residual value estimated useful life 108000 8000 5 20000 Year Depreciation Accumulated depreciation 1 for 6 months 10000 10000 2 20000 30000 3 20000 50000 4 20000 70000 5 20000 90000 6 for 6 months 10000 100000 Total 100000 a2 200 declining balance method Depreciation rate 100 5 years 200 40 Year Book value at See Answer

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