classic irons inc smith steakhouse staffing company food to go 496579

1. Classic Irons, Inc. purchased manufacturing equipment with an expected useful life of five years or 5000 hours of usage. The equipment was purchased on January 1, 2008 for $460,000. It is expected to have a salvage value of $60,000 at the end of five years. During 2008, the equipment was used for 1200 hours. Assume that usage for the next four years will be 1100 hours, 900 hours, 1300 hours and 500 hours, respectively.

a) What is the amount of depreciation expense for each of the five years using the straight line method?

b) What is the amount of depreciation expense for each of the five years using the double declining balance method?

c) What is the amount of depreciation expense for each of the five years using the units of production method?

2. Smith Steakhouse is a restaurant catering to a variety of customers. They purchased a new high-power oven at a cost of $100,000 on January 1, 2006. The oven has an expected useful like of four years and an estimated salvage value of $10,000. Smith Steakhouse uses straight-line depreciation for all of its depreciable assets.

On May 1, 2008, the owner of the restaurant was persuaded to purchase a new oven that operated more efficiently. The old oven was sold at the time for $15,000.

a) What is the amount of depreciation expense recorded on the old machine for each year of use? Show computations.

b) What is the amount of gain or lost on the disposal of the old machine? Show computations.

3. Staffing Company purchased the net assets (i.e., assets minus liabilities) of Time Management, Inc. for $390,000. Time Management, Inc. is a retailer of software, books, seminars and related items. Its net assets have been carried on its own books at a total of $183,000. An appraisal of all of Time Managements assets and liabilities revealed a net fair market value of $229,000. Staffing Company is willing to pay extra because of Time Managements very loyal retail customers, most of whom have dealt exclusively with the company for many years and also their loyal employees who have also been with the company for many years. What is the amount of goodwill that Staffing Company should record at acquisition of Time Management, Inc.?

4. Food to Go Delivery Service disposed of one of their delivery cars after using it for two years. The records of the company provide the following information:

Delivery car cost: $30,000

Accumulated depreciation: $10,000

Calculate the gain or loss on the disposal of the car for each of the following independent situations:

a) Food to Go sold the car to another company for $22,000.

b) Food to Go sold the car to another company for $17,000.

c) The car was stolen from the parking lot and no insurance was carried on it for theft.