【正文】 hio. After the machine arrives, setup costs of $1,300 are incurred, along with $4,000 in testing costs. Compute the cost of Heat Co.’s new machine. ?The McGrawHill Companies, Inc., 1999 Slide 97 Irwin/McGrawHill Determining Cost Example Li s t pr i c e 5 2 , 0 0 0$ S a l e s t a x 8 % 4 , 1 6 0 Tr a ns por t a t i on c os t 500 S e t up 1 , 3 0 0 Te s t i ng 4 , 0 0 0 Tot a l c os t t o H e a t C o. 6 1 , 9 6 0$ D a t e D e s c r i p t i o n D e b i t C r e d i tPrepare the journal entry. ?The McGrawHill Companies, Inc., 1999 Slide 98 Irwin/McGrawHill Determining Cost Example Li s t pr i c e 5 2 , 0 0 0$ S a l e s t a x 8 % 4 , 1 6 0 Tr a ns por t a t i on c os t 500 S e t up 1 , 3 0 0 Te s t i ng 4 , 0 0 0 Tot a l c os t t o H e a t C o. 6 1 , 9 6 0$ D a t e D e s c r i p t i o n D e b i t C r e d i t4 M a y Ne w M a c h i n e 6 1 , 9 6 0 Ca s h 6 1 , 9 6 0 ?The McGrawHill Companies, Inc., 1999 Slide 99 Irwin/McGrawHill Special Considerations Improvements to land such as driveways, fences, and landscaping are recorded separately. Land Improvements Cost includes real estate missions, escrow fees, legal fees, clearing and grading the property. Land ?The McGrawHill Companies, Inc., 1999 Slide 910 Irwin/McGrawHill Special Considerations Repairs made prior to the building being put in use are considered part of the building抯 cost. Buildings ?The McGrawHill Companies, Inc., 1999 Slide 911 Irwin/McGrawHill Special Considerations Equipment Related interest, insurance, and property taxes are treated as expenses of the current period. ?The McGrawHill Companies, Inc., 1999 Slide 912 Irwin/McGrawHill Special Considerations I think I抣 l buy the whole thing。 40,000 Tons = $25 Per Ton Depletion of Natural Resources Example ?The McGrawHill Companies, Inc., 1999 Slide 974 Irwin/McGrawHill For the year ABC mined and sold 13,000 tons. What is the total depletion cost for the year? a. $300,000. b. $325,000. c. $225,000. d. $275,000. Depletion of Natural Resources Example ?The McGrawHill Companies, Inc., 1999 Slide 975 Irwin/McGrawHill For the year ABC mined and sold 13,000 tons. What is the total depletion cost for the year? a. $300,000. b. $325,000. c. $225,000. d. $275,000. Depletion cost = 13,000 x $25 = $325,000 Depletion of Natural Resources Example ?The McGrawHill Companies, Inc., 1999 Slide 976 Irwin/McGrawHill Specialized plant assets may be required to extract the natural resource. These assets are recorded in a separate account and depreciated. Depletion of Natural Resources ?The McGrawHill Companies, Inc., 1999 Slide 977 Irwin/McGrawHill End of Chapter 9 。di gi tsA c c e l e r a te d m e thods (not s pe c i fie d)Uni ts of out putO the r?The McGrawHill Companies, Inc., 1999 Slide 932 Irwin/McGrawHill MACRS: The Tax Method MACRS = Modified Accelerated Cost Recovery System Based on DecliningBalance Methods The only accelerated method allowed by the IRS when puting depreciation for tax return purposes. Asset Cost ? MACRS rate Rates are available from tables provided by the IRS. ?The McGrawHill Companies, Inc., 1999 Slide 933 Irwin/McGrawHill Other Issues ?Estimates of Useful Life and Residual Value ? May differ from pany to pany. ? The reasonableness of management抯 estimates is evaluated by external auditors. ?Principle of Consistency ? Companies should avoid switching depreciation methods from period to period. ?The McGrawHill Companies, Inc., 1999 Slide 934 Irwin/McGrawHill Revising Depreciation Rates So depreciation is an estimate. Predicted salvage value Predicted useful life Over the life of an asset, new information may e to light that indicates the original estimates need to be revised. ?The McGrawHill Companies, Inc., 1999 Slide 935 Irwin/McGrawHill On January 1, 1998, equipment was purchased that cost $30,000, has a useful life of 10 years and no salvage value. During 2022, the useful life was revised to 8 years total (5 years remaining). Calculate depreciation expense for the year ended December 31, 2022, using the straightline method. Revising Depreciation Rates Example ?The McGrawHill Companies, Inc., 1999 Slide 936 Irwin/McGrawHill Revising Depreciation Rates Example Book value at date of change Salvage value at date of change Remaining useful life at date of change When our estimates change, depreciation is: ?The McGrawHill Companies, Inc., 1999 Slide 937 Irwin/McGrawHill Revising Depreciation Rates Example A s s e t c o s t 3 0 , 0 0 0$ A c c u m u l a t e d d e p r e c i a t i o n , 1 2 / 3 1 / 2 0 0 0 ( $ 3 , 0 0 0 p e r y e a r ? 3 y e a r s ) 9 , 0 0 0 R e m a i n i n g b o o k v a l u e 2 1 , 0 0 0$ D i v i d e b y r e m a i n i n g l i f e ? 5R e v i s e d a n n u a l d e p r e c i a t i o n 4 , 2 0 0$ When our estimates change, depreciation is: Book value at date of change Salvage value at date of change Remaining useful life at date of change ?The McGrawHill Companies, Inc., 1999 Slide 938 Irwin/McG