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Solved: Swanson & Hiller, Inc., Purchased A New Machine On September 1 Of The Current Year At A Cost Of $130,000. The Machine’s Estimated Useful Life At The Time Of The Purchase Was Five Years, And I

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Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $130,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $10,000. The company reports on a calendar year basis. Required:

a-1. Prepare a complete depreciation schedule, beginning with the current year, using the straight-line method. (Assume that the half-year convention is used).

a-2. Prepare a complete depreciation schedule, beginning with the current year, using the 200 percent declining-balance method. (Assume that the half-year convention is used).

a-3. Prepare a complete depreciation schedule, beginning with the current year, using the 150 percent declining-balance, switching to straight-line when that maximizes the expense.

(Assume that the half-year convention is used). b. Which of the three methods computed in part a is most common for financial reporting purposes?

c. Assume that Swanson & Hiller sells the machine on December 31 of the fourth year for $29,500 cash. Compute the resulting gain or loss from this sale under each of the depreciation methods used in part a.



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a-1. Straight line method: Depreciation expense = Purchase cost of asset - residualvalue / estimated useful life = $130,000 - 10,000 / 5

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