[frasersm1]

NINJA Question –

On this question could someone explain the following:

To get the machine destroyed by fire number why do we multiply 5 x 10% x 23,000? Where does the 10% come from?

Thank you!

[confusedcandidate]

I just did the sim and got it all right, except for the machine destroyed by fire. 5 x .1 x 23,000 = 11,500: the 5 is five years, 10% is the depreciation per year, and 23000 is the book value, so they debit AccDep for 11500. I don't understand where they got 10% depreciation per year though.

Weekends are meaningless to a CPA candidate

[confusedcandidate]

Got it! You have to subtract the weighted value of the machine destroyed by fire from the original balance of machinery and equipment and add to it the weighted amount of the machinery purchased and then extrapolate how they depreciated it.

900,000-(3/4)(23,000) + (6/12)(280000+5000+25000) = 1,037,750

Depreciation expense was 103,775 so they were depreciating everything over 10 years, therefore 5 years times 10% per year times carrying value equals the AccDep you need to debit.

Yeesh that was hard.

Weekends are meaningless to a CPA candidate

[Author]

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