You are a financial analyst for Ford Motor Company

You are a financial analyst for Ford Motor Company

3.

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You are a financial analyst for Ford Motor Company and have been asked to determine the impact of alternative depreciation methods. For your analysis, you have been asked to compare methods based on a machine that cost $106,000. The estimated useful life is 13 years, and the estimated residual value is $2,000. The machine has an estimated useful life in productive output of 200,000 units. Actual output was 20,000 in year 1 and 16,000 in year 2.

 

Required:
1.For years 1 and 2 only, prepare separate depreciation schedules assuming:

 

a.Straight-line method. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the “$” sign in your response.)

 

YearDepreciation
Expense
Accumulated
Depreciation
Net
Book Value
At acquisition$ [removed]
1$ [removed]$ [removed][removed]
2$ [removed][removed][removed]

 

b.Units-of-production method. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the “$” sign in your response.)

 

YearDepreciation
Expense
Accumulated
Depreciation
Net
Book Value
At acquisition$ [removed]
1$ [removed]$ [removed][removed]
2[removed][removed][removed]

 

c.Double-declining-balance method. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the “$” sign in your response.)

 

YearDepreciation
Expense
Accumulated
Depreciation
Net
Book Value
At acquisition$ [removed]
1$ [removed]$ [removed][removed]
2[removed][removed][removed]

 

During 2012, Jensen Company disposed of three different assets. On January 1, 2012, prior to their disposal, the accounts reflected the following:

 

AssetOriginal
Cost
Residual
Value
Estimated
Life
Accumulated
Depreciation
(straight line)
   Machine A$21,000$3,0008 years$13,500 (6 years)
   Machine B41,0004,00010 years29,600 (8 years)
   Machine C75,0005,00015 years56,000 (12 years)

 

The machines were disposed of in the following ways:

 

a.Machine A: Sold on January 1, 2012, for $7,200 cash.
b.Machine B: Sold on December 31, 2012, for $8,500; received cash, $2,500, and a $6,000 interest bearing (12 percent) note receivable due at the end of 12 months.
c.Machine C: On January 1, 2012, this machine suffered irreparable damage from an accident. On January 10, 2012, a salvage company removed the machine at no cost.

 

 

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