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Find what is the depreciation expense for the first year

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On May 1, the XYZ Co. purchased factory machinery having an installment price of ?6,000,000 and a list price of ?5,500,000. The company made a ?1,000,000 down payment and issued a 4-year, 4 million non-interest bearing note payable ?1,000,000 every May 1 starting next year. The prevailing interest rate for similar note is at 6%.

Problem 1: How much should the factory machinery be initially recognized?

Problem 2: Assuming an estimated useful life of 5 years with a 10% salvage value based on cost, what is the depreciation expense for the first year under the 150% declining balance method?

Reference no: EM132823623

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