Accounting  Quiz Depreciation Expense

Subject: Business / Accounting
Question
Depreciation Expense

Valley Corporation purchased a new piece of equipment on June 1, 2015. The cost ofthis machine was $325,000. The company estimated that the machine would have asalvage value of $25,000 at the end of its service life. Its life is estimated at four years,and its working hours are estimated at 50,000 hours. The year end is December 31.Compute the depreciation expense under the following methods in an Excelspreadsheet. Each of the following should be considered unrelated:1.Straight-line depreciation for 20152.Units of production method for 2015, assuming that machine usagewas 13,000 hours3.Sum-of-the-years’ digits for 20154.Double-declining balance for 20152.
Remaining Life

Taylor Lewis Company has provided information on intangible assets as follows.A patent was purchased from Craig Company for $4,000,000 on June 1, 2015. Lewisestimated the remaining useful life of the patent to be eight years. The patent wascarried in Craig’s accounting records at a net book value of $3,500,000 when Craigsold it to Lewis.During 2016, a franchise was purchased from Faragher Company for $360,000. Inaddition, 8% of revenue from the franchise must be paid to Faragher. Revenue from thefranchise for 2016 was $1,950,000. Lewis estimates the useful life of the franchise tobe 12 years and takes a full year’s amortization in the year of purchase.Lewis incurred research and development costs in 2016 as follows:Materials and equipment$286,500Personnel$153,700Indirect costs$95,355$535,555Lewis estimates that these costs will be recouped by December 31, 2019. Thematerials and equipment purchased have no alternative uses.On January 1, 2016, because of recent events in the ±eld, Lewis estimates that theremaining life of the patent purchased on June 1, 2015, is only ±ve years from January1, 2016.1.Prepare a schedule showing the intangible section of Lewis’s balancesheet at December 31, 2016. Show supporting computations in goodform.2.Prepare a schedule showing the income statement e²ect for the yearended December 31, 2016, as a result of the facts above. Showsupporting computations in good

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