Financial Accounting

FINANCIAL ACCOUNTING 5

FinancialAccounting

TaskA

DepreciationExpense for 2010

Depreciationof ties per year = 12,500,000 / 20

=625,000

Depreciationof rails per year = 19,000,000 / 40

=475,000

Compositedepreciation rate = Total depreciation per year / Total cost

=1,100,00 / 33,000,000

=3.33%

Compositelife = 31,500,000 / 1,100,000

=28.64 years

Depreciationexpense for 2011

Replacedties = 1,000,000 / 20 = 50,000 ties

Cost(new) = 50,000 * 20 = 1,000,000

Cost(old) = 50,000 * 13 = 650,000

Originalcost = 13,000,000 + 1,000,000 – 650,000 = 13,350,000

Replacedrails = 800,000 / 40 = 20,000 rails

Cost (new) = 20,000 * 50 = 1,000,000

Cost(old) = 20,000 * 25 = 500,000

Originalcost = 20,000,000 + 1,000,000 – 500,000 = 20,500,000

Tiesdepreciation per year = 12,850,000 / 20

=642,500

Railsdepreciation per year = 19,500,000 / 40

=487,500

Compositedepreciation rate = 1,130,000/ 33,850,000

=3.34%

Compositelife = Total depreciable cost / total annual depreciation

=32,350,000/ 1,130,000

=28.63 years

TaskB

Depreciationof ties per year = 12,850,000 / 20

=642,500

Groupdepreciation rate = depreciation per year / total cost

=642,500 / 13,350,000

=4.81%

Grouplife = depreciable base / depreciation per year

=12,850,000 / 642,500

=20 years

References

Carmichael,D. R., &amp Graham, L. (2009).&nbspAccountants`handbook.Hoboken, N.J: Wiley.