Question :
"Smart hardware purchase new shelving for its store on 1st April,2011. The shelving is expected to have a 20 yr life and no residual value. The subsequent expenditures were associated with the purchase.
Cost of the shelving-$12,000
Freight charges-520
Sales taxes-780
Installation of shelving-2,700
Cost to repair shell damaged through installation-400
Instructions:
a) Evaluate depreciation expense for the years 2011 during 2013 under every depreciation listed below:
a. Stright-line, with fractional years rounded to the closed whole month.
b. 200 % declining-balance, using the half-year convention
c. 150 % declining-balance, using the half-year convention.
b) Smart Hardware has two conflicting objectives, Management needs to report the maximum possible earnings in its financial statement, yet it also wants to reduce its taxable income reported to the IRS. Describe how both of these objectives can be met.
c.) Which of the depreciation techniques applied in part A resulted in the lowest reported book value at the end of 2014? Is book value an evaluation of an asset's fair value? Describe
d.) Suppose that Smart Hardware sold the old shelving that was being replaced. The old shelving had initially cost $9,000. Its book value at the time of the sale was $400. Record the sale of the old shelving under the subsequent conditions:
a. The shelving was sold for $1,200 cash
b. The shelving was sold for $200 cash.