Smart Hardware purchased new shelving for its store on

April
Smart Hardware purchased new shelving for its store on April 1, 2011. The shelving is expected
to have a 20-year life and no residual value. The following expenditures were associated with
the purchase:Cost of the shelving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . $12,000Freight charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 520Sales taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 780Installation of shelving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 2,700Cost to repair shelf damaged during installation . . . . . . . . . . . . . . . . . . . .. . . . . .
. . . . . . . . . 400Instructionsa. Compute depreciation expense for the years 2011 through 2013
under each depreciation method listed below:1. Straight-line, with fractional years rounded to
the nearest whole month.2. 200 percent declining-balance, using the half-year convention.3.
150 percent declining-balance, using the half-year convention.b. Smart Hardware has two
conflicting objectives. Management wants to report the highest possible earnings in its financial
statements, yet it also wants to minimize its taxable income reported to the IRS. Explain 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 2014? 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:1. The shelving was
sold for $1,200 cash.2. The shelving was sold for $200 cash.View Solution:
Smart Hardware purchased new shelving for its store on April
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