Reference no: EM132406782

Question

Spectacular Condo Corp. purchased exercise equipment for its recreation room on January 1, 2016 for a cost of $60 000. The equipment is estimated to have a $5000 residual value and a five-year useful life. It is also estimated that the equipment will be used more than 100 000 times over its five-year life.

As the condominium corporation's accountant, you have been asked to analyze the following independent amortization scenarios. Please be sure to show your calculations.

A. If the condominium corporation uses the straight-line amortization method, how much amortization expense should be recorded for the year ended December 31, 2016?

B. Suppose that the exercise equipment was used 16 000 times in 2016 and 24 000 times in 2017. Using the units-of-production amortization method, calculate the net book value for the year ended December 31, 2017.

C. If the condominium corporation chose to use the double-declining-balance method of amortization instead, calculate the balance of the 'Accumulated Amortization, Exercise Equipment' account as of December 31, 2018. Assume that the DDB rate is 40%

D. Assuming that the condominium corporation is calculating amortization for internal purposes, which method would you recommend? Explain why.

E. Explain how your chosen method would be similar or different from the method required for taxation purposes here in Canada.