show me the calculation also please thanks a lot Question 1

show me the calculation also please, thanks a lot

Question 1 James has just started a lawn-mowing service and has purchased a group of new lawnmowers for $40,000. The friend expects the mowers to last five years and to have negligible resale value at that point. The friend\'s business plan projects cutting 5,000 lawns over the five years, with per-year projections of 500, 1,000, 1,200, 1,800 and 500 lawns over the five years. Required: Calculate the accumulated depreciation balance at the end of the second year using each of the following depreciation bases: i) straight-line ii) reducing balance (25 per cent rate) iii) units-of-production. b) In what circumstances is the use of reducing balance depreciation more appropriate than using the straight-line method? At 30 June 2010, the balance sheet of Fragrant Flowers Ltd disclosed the following noncurrent assets: 60,000 Land Buildings Less: Accumulated depreciation 130,000 50,000 80,000 $140,000 On 1 July 2010, the land was revalued upwards by $20,000 and the building was revalued at $90,000. Depreciation expense with respect to the building was $4,500 for each of the years ended 30 June 2011 and 2012. On 1 July 2012, the land was revalued at its recoverable amount of $70,000 and the building at $55,000. Required: Prepare journal entries to record the revaluations of the land and buildings on 1 July 2010 and 1 July 2012.

Solution

1 Straight line depreciation = (Cost of asset - salvage value )/ Life of the asset Depreciation expense = (40000- 0) /5 8000 Accumulated depreciation Depreciation expense Book value Year 0 0 40000 Year 1 8000*12/12 8,000 8,000 32,000 Year 2 8000*12/12 8,000 16,000 24,000 Reducing balance method Accumulated depreciation Depreciation = written down value * depreciation rate Depreciation expense Book value Year 0 40000 Year 1 Depreciation = 40000*25%   10000 10,000 30,000 Year 2 Depreciation = 30000 *25%   7500 17,500 22,500 3 Units of production method Depreciation per machine hour = (Cost of asset - salvage value )/ total machine hour Depreciation per machine hour = (40000 - 0 )/5000 Depreciation per item 8 Accumulated depreciation Depreciation expense Book value Year 0 40000 Year 1 8 * 500 4000 4,000 36,000 Year 2 8*1000 8000 12,000 28,000 b) Reducing balance method is more beneficial than straight line when the Balance is to be reduced more in the earlier years than in the later years c) 01-Jul-10 Land 20000 Building (90000-80000) 10000            Revaluation surplus 30000 Land Building 01-Jul-10 80000 90000 Depreciation 2011 0 -4500 Depreaciation 2012 0 -4500 01-Jul-12 80000 81000 01-Jul-12 Revaluation surplus 36000            Land (80000-10000) 10000            Building (81000-55000) 26000