Question Details

Compute the acquisition cost of the equipment




Ex. 1
Kemp Company purchased factory equipment with an invoice price of €90,000. Other costs incurred were freight costs, €1,100; installation wiring and foundation, €2,200; material and labor costs in testing equipment, €700; oil lubricants and supplies to be used with equipment, €500; fire insurance policy covering equipment, €1,400. The equipment is estimated to have a €5,000 residual value at the end of its 8-year useful service life.

Instructions
(a)	Compute the acquisition cost of the equipment. Clearly identify each element of cost.
(b)	If the double-declining-balance method of depreciation was used, the constant percentage applied to a declining book value would be __________.

Ex. 2
Chang Company purchased a machine at a cost of ¥900,000. The machine is expected to have a ¥50,000 residual value at the end of its 5-year useful life.  Instructions Compute annual depreciation for the first and second years using the (a)	straight-line method. (b)	double-declining-balance method. 




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