Spacely Sprockets, Inc. invested $4,995,000 for new manufacturing equipment for its plant in Jetson, NY. The equipment was anticipated to have a useful life of 11 years, or 29,800 machine hours and a residual value of $507,000. In its first year in operation the equipment was used for 2,180 hours and an additional 2,700 hours in its second year of usage. The Income Statement for years 1 and 2 of Spacely Sprockets, Inc. are shown below. All items rounded to nearest whole dollar. Spacely Sprockets, Inc. Year 1 Year 2 Net Sales $35,590,000 $36,164,000 COGS $23,120,000 $22,978,000 Gross Profit $12,470,000 $13,186,000 Operating Expenses (before adding in Depreciation) $7,650,000 $8,152,000 Income from Operations $4,820,000 $5,034,000 Income Tax Expense (at 30%) $1,446,000 $1,510,200 Net Income $3,374,000 $3,523,800 Round all items to the nearest whole dollar and use rounded values for all future calculations. 1. Calculate the depreciation expense for year 1 and 2 using the Units of Production method. (Cost - Residual Value) / Number of Units = Depreciation per unit - / = Year Depreciation per unit X Number of hours used = Total Depreciation Year 1 X = Year 2 X = 2. Recalculate the Income Statement for Year 1 and Year 2 including the Depreciation Expense as part of the Operating Expenses. Spacely Sprockets, Inc. Year 1 Year 2 Net Sales COGS Gross Profit Operating Expenses (before adding in Depreciation) Income from Operations Income Tax Expense (at 30%) Net Income
Spacely Sprockets, Inc. invested $4,995,000 for new manufacturing equipment for its plant in Jetson, NY. The equipment was anticipated to have a useful life of 11 years, or 29,800 machine hours and a residual value of $507,000. In its first year in operation the equipment was used for 2,180 hours and an additional 2,700 hours in its second year of usage. The Income Statement for years 1 and 2 of Spacely Sprockets, Inc. are shown below. All items rounded to nearest whole dollar. Spacely Sprockets, Inc. Year 1 Year 2 Net Sales $35,590,000 $36,164,000 COGS $23,120,000 $22,978,000 Gross Profit $12,470,000 $13,186,000 Operating Expenses (before adding in Depreciation) $7,650,000 $8,152,000 Income from Operations $4,820,000 $5,034,000 Income Tax Expense (at 30%) $1,446,000 $1,510,200 Net Income $3,374,000 $3,523,800 Round all items to the nearest whole dollar and use rounded values for all future calculations. 1. Calculate the depreciation expense for year 1 and 2 using the Units of Production method. (Cost - Residual Value) / Number of Units = Depreciation per unit - / = Year Depreciation per unit X Number of hours used = Total Depreciation Year 1 X = Year 2 X = 2. Recalculate the Income Statement for Year 1 and Year 2 including the Depreciation Expense as part of the Operating Expenses. Spacely Sprockets, Inc. Year 1 Year 2 Net Sales COGS Gross Profit Operating Expenses (before adding in Depreciation) Income from Operations Income Tax Expense (at 30%) Net Income
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 46P
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Question
Spacely Sprockets, Inc. invested $4,995,000 for new manufacturing equipment for its plant in Jetson, NY. The equipment was anticipated to have a useful life of 11 years, or 29,800 machine hours and a residual value of $507,000. In its first year in operation the equipment was used for 2,180 hours and an additional 2,700 hours in its second year of usage.
The Income Statement for years 1 and 2 of Spacely Sprockets, Inc. are shown below.
All items rounded to nearest whole dollar.
1. Calculate the depreciation expense for year 1 and 2 using theUnits of Production method .
2. Recalculate the Income Statement for Year 1 and Year 2 including the Depreciation Expense as part of the Operating Expenses.
The Income Statement for years 1 and 2 of Spacely Sprockets, Inc. are shown below.
All items rounded to nearest whole dollar.
| Spacely Sprockets, Inc. | Year 1 | Year 2 |
|---|---|---|
| Net Sales | $35,590,000 | $36,164,000 |
| COGS | $23,120,000 | $22,978,000 |
| Gross Profit | $12,470,000 | $13,186,000 |
| Operating Expenses (before adding in |
$7,650,000 | $8,152,000 |
| Income from Operations | $4,820,000 | $5,034,000 |
| Income Tax Expense (at 30%) | $1,446,000 | $1,510,200 |
| Net Income | $3,374,000 | $3,523,800 |
Round all items to the nearest whole dollar and use rounded values for all future calculations.
1. Calculate the depreciation expense for year 1 and 2 using the
| (Cost | - | Residual Value) | / | Number of Units | = | Depreciation per unit |
|---|---|---|---|---|---|---|
| - | / | = |
| Year | Depreciation per unit | X | Number of hours used | = | Total Depreciation |
|---|---|---|---|---|---|
| Year 1 | X | = | |||
| Year 2 | X | = |
2. Recalculate the Income Statement for Year 1 and Year 2 including the Depreciation Expense as part of the Operating Expenses.
| Spacely Sprockets, Inc. | Year 1 | Year 2 |
|---|---|---|
| Net Sales | ||
| COGS | ||
| Gross Profit | ||
| Operating Expenses (before adding in Depreciation) |
||
| Income from Operations | ||
| Income Tax Expense (at 30%) | ||
| Net Income |
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