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Acquisition Cost and Double-declining Balance Depreciation

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Howard Company purchased factory equipment with an invoice price of $90,000. Other costs incurred were freight costs, $2,100; 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 salvage 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 __________.

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Solution Preview

(a) Compute the acquisition cost of the equipment. Clearly identify each element of cost.

Acquisition cost consists of Purchase price, Sales tax, Freight charges, Transit insurance
Assembly, Installation, Testing and Trial Runs.

Other ...

Solution Summary

Computes the acquisition cost of the equipment and the the constant percentage applied to a declining book value in the case of double-declining-balance method of depreciation.

$2.19