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marysya [2.9K]
3 years ago
5

Equipment was purchased for $68,000 on January 1, 2013. Freight charges amounted to $2,800 and there was a cost of $8,000 for bu

ilding a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used?a. $26,720.b. $13,360.c. $11,440.d. $22,880.
Business
1 answer:
Dahasolnce [82]3 years ago
5 0

Answer:

a. $26,720

Explanation:

Before computing the accumulated depreciation, first we have to compute the original cost of the equipment, after that the depreciation expense. The calculation is shown below:

Original cos t = Equipment purchase cost + freight charges + installment charges

= $68,000 + $2,800 + $8,000

= $78,800

Now the depreciation expense under the straight-line method is shown below:

= (Original cost - residual value) ÷ estimated life in years

= ($78,800 - $12,000) ÷ 5 years

= $13,360

Now the accumulated depreciation is

= Depreciation expense × number of years

= $13,360 × 2 years

= $26,720

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First step is to calculate the amortization for 2013

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Amortization for 2013=$500,000

Second step is to calculate the amortization for 2014

Amortization for 2014=$10,000,000/20

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First step is to calculate the number of bonds

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Number of bonds=10,000

Second step is to calculate Price for the bond

Price for the bond=10,000×5

Price for the bond=50,000

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Bonds Payable=10,000,000×30/100

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