Aliquippa Co

question 71

Essay

Aliquippa Co.purchased equipment at the beginning of 2017 for $60,000.In addition,Aliquippa paid $2,000 for delivery of the equipment to its plant and $1,000 for installation of the equipment.The equipment has an estimated residual value of $7,000 and an estimated life of seven years or 70,000 hours of operation.Aliquippa is looking at alternative depreciation methods for the equipment.Calculate the following:
A. The depreciation expense for the year 2017 using the straight-line depreciation method.

B. The total accumulated depreciation at December 31,2018, using the units-of-production depreciation method. Assume that the equipment is operated for 15,000 hours in 2017 and 12,000 hours in 2018 .

C. The book value of the equipment at December 31,2017 , using the double-declining-balance depreciation method.

D. Which of the above methods is considered accelerated?

E. What are the advantages of using an accelerated depreciation method as compared to the straight-line method for lowering taxes early in the life of the equipment?

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Definitions:

Resale Value

The likely selling price of a good or asset if sold at a future date, considering depreciation or appreciation.

Office Furniture

Items designed for use in a work or office setting, including desks, chairs, and file cabinets.

Straight-Line Method

A depreciation method that allocates an equal amount of an asset's cost to each year of its useful life.

Resale Value

The estimated market value of an asset if sold again; often used in reference to vehicles, electronics, and real estate.