How do I solve this accounting problem?

Answers:0   |   LastUpdateAt:2012-07-30 23:37:56  

Question
karanzala
Asked at 2012-07-30 23:37:56
LOCATION :
The Phillips Manufacturing Company makes a new and exciting in its factory a year old and needs to expand its capacity to meet demand for their product. Phillips effectively doubles its property, plant and equipment. Favorable financial statements also need to obtain a commercial loan for new equipment and are concerned about the possible effects, both in the Income Statement and Balance Sheet. Phillips initially decided to use the double declining balance method of depreciation of their equipment . He has provided the following information :

Property, plant and equipment (currently ) $ 10 million
Accumulated depreciation (currently ) $ 1,000,000
Age of old equipment in years 1
The life of old equipment in the 20

New team proposed :
Sale price of $ 9,000,000
equipment Sales tax 630,000
Shipping costs 100,000
Installing 100,000
Insurance during shipping 30,000
Modification to the factory for the new
Teams of 140,000
The estimated useful life in the 20
No salvage value

1 . Calculate the cost to the new equipment must be capitalized.

2 . Calculate the depreciation expense for the new team for the first year for both methods of assessment of the straight-line and double-dip , after the expansion .
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