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“Smart hardware purchase new shelving for its store on April 1,2009. The selving is expected to have a 20 yr life and no residual value. The follwoing expenditures were associated with the purchase. Cost of the shelving-$12,000 Freight charges-520 Sales taxes-720 Installation of shelving-2,700 Cost to repair shell damaged during installation-400 Instructions: a) Compute depreciation expense for the years 2009 through 2012 under each depreciation listed below: a. Stright-line, with fractional years rounded to the nearest whole month. b. 200 percent declining-balance, using the half-year convention c. 150 percent declining-balance, using the half-year convention. b. Smart Hardware has two conflicting objetive, Management wants to report the highest posible earnings in its financial statement, yet it also wants to minimize its taxable income reported to the IRS. Explaing how both of these objectives can be met. c. Which of the depreciation methods applied in part A resulted in the lowest reported book value at the end of 2010? Is book value an estimate of an asset’s fair value? Explain d. Assume that Smart Hardware sold the old shelving that was being replaced. The old shelving had originally cost $9,000. Its book value at the time of the sale was $400. Record the sale of the old shelving under the following conditions: a. The shelving was sold for $1,200 cash b. The shelving was sold for $200 cash.
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