Aliquippa Co.purchased equipment at the beginning of 2016 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 7 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 2016 using the straight-line depreciation method.
B. The total accumulated depreciation at December 31,2017 , using the units-of-production depreciation method. Assume that the equipment is operated for 15,000 hours in 2016 and 12,000 hours in 2017.

C. The book value of the equipment at December 31, 2016, 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?

Question

Aliquippa Co.purchased equipment at the beginning of 2016 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 7 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 2016 using the straight-line depreciation method.
B. The total accumulated depreciation at December 31,2017 , using the units-of-production depreciation method. Assume that the equipment is operated for 15,000 hours in 2016 and 12,000 hours in 2017.

C. The book value of the equipment at December 31, 2016, 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?

Quizplus · Accepted Answer

The Answer of Aliquippa Co.purchased equipment at the beginning of 2016 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 7 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 2016 using the straight-line depreciation method.
B. The total accumulated depreciation at December 31,2017 , using the units-of-production depreciation method. Assume that the equipment is operated for 15,000 hours in 2016 and 12,000 hours in 2017.

C. The book value of the equipment at December 31, 2016, 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?