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    Precision Manufacturing: Computing Depreciation

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    At the beginning of 2012, Precision Manufacturing purchased a new computerized drill press for $50,000, it is expected to have a five-year life and a $5000.00 salvage value.


    a. Compute the depreciation for each of the five years, assuming that the company uses
    (1) Straight Line depreciation
    (2) Double decline balance depreciation

    b. Record the purchase of the drill press and the depreciation expense for the first year under the straight line and double declining balance methods in a financial statement like the one below

    Assets = Equity Rev - Expense = Net Inc Cash Flow
    Cash + Drill Press - Acc Dep = Ret Earn

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    Solution Preview

    Solution is provided in a separate Excel file attached. It contains following parts.

    1 1 Calculation of annual deprecition under Straight line Method

    2 Calculation of rate of Depreciation under Double Declining Balance Metod:

    3 ...

    Solution Summary

    This solution helps with questions regarding computing depreciation and recording the purchases of a drill.