Posted: July 14th, 2016

What is a higher loans policy?

Higher Company had the following disposals of production equipment during 2006:

Equipment ID # /Purchase Date/Original Cost/Date of Disposal/Disposal Proceeds/Useful Life/Depreciation Method

301 2/28/1998 $70,300 10/3/2003 $14,300 10 Straight-line
415 7/3/2005 $96,000 7/19/2002 $6,300 5 150% declining-balance
573 6/15/2004 $94,500 3/21/2002 $38,000 6 Sum-of-the-years’-digits

Higher’s policy is to charge a full year’s depreciation in the year of purchase if an asset is purchased before July 1. For assets purchased after July 1, only one-half year’s depreciation is charged. During the year of disposal, one-half year’s depreciation is charged if the asset is sold after June 30. No depreciation is charged during the year of disposal if the asset is sold before July 1. In all three cases above, estimated residual value at the time of acquisition was zero.

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