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Excel Assignment #3

MSB 60130 Summer 2013

Depreciation of Long-term Assets

Assume that your company purchased equipment costing $850,000 with a residual value of $70,000 and a useful life of 7 years or 1,530,000 units.

1) Assume the equipment was purchased on January 1, 2013. Prepare a depreciation schedule to calculate depreciation expense, accumulated depreciation, and book value for the useful life of the asset using the Straight-line method, the Units of Production method, and the Double Declining Balance method.

2) Assume the equipment was purchased on August 1, 2013. Prepare a depreciation schedule to calculate depreciation expense, accumulated depreciation, and book value for the useful life of the asset using the Straight-line method, the Units of Production method, and the Double Declining Balance method.

3) Assume that the equipment was purchased on January 1, 2013. Further, assume that the equipment was sold on April 30, 2017 for $220,000. Calculate the depreciation for 2017 on the asset using the Straight-line method, the Units of Production method, and the Double Declining Balance method. Further, calculate the accumulated depreciation, the book value and the amount of the gain or loss as of April 30, 2017 using the Straight-line method, the Units of Production method, and the Double Declining Balance method.

4) Assume that the equipment was purchased on January 1, 2013 and you use the straight-line method to calculate depreciation. On January 1, 2016 you had a major overhaul of the equipment performed which cost $175,000 and extended the useful life through December 31, 2022. You expect that the equipment will have a residual value on December 31, 2022 of $50,000. Calculate the new depreciation base for the asset and prepare a new depreciation schedule for the asset.

5) Assume that the equipment was purchased on January 1, 2013. On December 31, 2018 you need to perform a test of impairment. Determine the book value of the asset at December 31, 2018 using the Straight-line method, the Units of Production method, and the Double Declining Balance method. You determine that the expected future cash flows for the equipment will be $120,000 and the fair market value of the asset is $150,000. Determine if there is an impairment using each of the depreciation methods. If there is impairment, determine the amount of loss that needs to be recorded. If no loss needs to be recorded, show a zero as you cannot record a gain.

Excel Rules:

1. You must use the Excel Templates provided on the MSB 60130 website (msb60130. ). Note that each template is individualized for each student with an ID code for each student. It will be assumed an Honor Code VIOLATION if you use a template with someone else’s ID Code.

1. You must use Microsoft EXCEL and not any other spreadsheet program. Failure to use MS Excel will result in a zero grade.

2. You must work individually on this assignment. Working with another student is a violation of the Notre Dame Honor code and will be enforced when discovered.

3. You must use links and formulas where ever possible. Failure to exploit Excel will result in a zero grade.

4. You must sign your name to the honor code statement (the first sheet of the Excel template). Failure to sign your name (by typing your name) will result in a zero grade.

5. You must name your Excel file as: last name first name Excel 1. Failure to name your file in this exact syntax will result in a zero grade.

6. The completed Excel assignment should be uploaded to the appropriate Excel dropbox on the MSB60130 website.

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