Problem 1: Hunt Company purchased factory equipment with an invoice price of $60,000. Other costs incurred were freight costs, $1,100; installation, $2,200; labor in testing equipment, $700; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 10 year useful life.
Required:
a) Compute the acquisition cost of the equipment.
b) If the double-declining balance method of depreciation was used, the percentage applied to a declining book value would be?
Problem 2: Jarhead Company purchased a machine at a cost of $90,000. The machine is expected to have a salvage value of $10,000 at the end of its ten-year useful life.
Required: Compute the annual depreciation for the first and second years using the:
a. Straight-line method.
b. Double declining balance method.
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