For each transaction below, determine the appropriate treatment on Spin Co.'s Year 5 income statement by selecting the a
Posted: Tue Jul 05, 2022 11:50 am
For each transaction below, determine the appropriate treatmenton Spin Co.'s Year 5 income statement by selecting the appropriateresponses in the pull-down menus.
Transaction #1:
Spin Co. purchased a specialized saw for $25,000 on March 1,Year 1. At the time of the purchase, the saw had a six-yearestimated useful life and a $3,000 salvage value. Spin Co.depreciated it using the straight-line (SL) method. Spin Co. alsouses the monthly convention to calculate the depreciation amountsfor its asset acquisitions. The saw was sold on July 31, Year 5 for$7,000.
Transaction #2:
Spin Co. purchased a drill press for $10,000 on January 1, Year4. At the time of the purchase, the drill press had a four-yearestimated useful life and a $1,000 salvage value at the end of fouryears. Spin Co. depreciated it using the double-declining balance(DDB) method. Spin Co. also uses the monthly convention tocalculate the depreciation amounts for its asset acquisitions. OnDecember 31, Year 5, management of Spin Co. decided that it willdispose of the drill press in early Year 6 for $8,000 (based on afirm offer from a potential buyer). Therefore, depreciation of thedrill press will be discontinued after December 31, Year 5 and thedrill press will be reclassified on the balance sheet as “otherassets”.
Transaction #1:
Spin Co. purchased a specialized saw for $25,000 on March 1,Year 1. At the time of the purchase, the saw had a six-yearestimated useful life and a $3,000 salvage value. Spin Co.depreciated it using the straight-line (SL) method. Spin Co. alsouses the monthly convention to calculate the depreciation amountsfor its asset acquisitions. The saw was sold on July 31, Year 5 for$7,000.
Transaction #2:
Spin Co. purchased a drill press for $10,000 on January 1, Year4. At the time of the purchase, the drill press had a four-yearestimated useful life and a $1,000 salvage value at the end of fouryears. Spin Co. depreciated it using the double-declining balance(DDB) method. Spin Co. also uses the monthly convention tocalculate the depreciation amounts for its asset acquisitions. OnDecember 31, Year 5, management of Spin Co. decided that it willdispose of the drill press in early Year 6 for $8,000 (based on afirm offer from a potential buyer). Therefore, depreciation of thedrill press will be discontinued after December 31, Year 5 and thedrill press will be reclassified on the balance sheet as “otherassets”.