Solar Innovations Corporation bought a machine at the beginning of the year at a

Question

Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $32,000. The estimated useful life was five years and the residual value was $4,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production for year 1, 2,100 units; year 2, 3,100 units; year 3, 2,100 units; year 4, 2,100 units; and year 5, 600 units. Required: 1. Complete a depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.) a. Straight-line

Explanation / Answer

a. Straight-Line: Income Statement Balance Sheet Year Depreciation Expense Cost Accumulated Depreciation Book Value At Acquisition $       32,000 0 $       32,000 1 $                         5,600 $       32,000 $                5,600 $       26,400 2 $                         5,600 $       32,000 $              11,200 $       20,800 3 $                         5,600 $       32,000 $              16,800 $       15,200 4 $                         5,600 $       32,000 $              22,400 $         9,600 5 $                         5,600 $       32,000 $              28,000 $         4,000 Working: Depreciation Under Straight Line method = (Cost-Salvage Value)/Useful life = (32000-4000)/5 = $       5,600 b. Units of production: Income Statement Balance Sheet Year Depreciation Expense Cost Accumulated Depreciation Book Value At Acquisition $       32,000 0 $       32,000 1 $                         5,880 $       32,000 $                5,880 $       26,120 2 $                         8,680 $       32,000 $              14,560 $       17,440 3 $                         5,880 $       32,000 $              20,440 $       11,560 4 $                         5,880 $       32,000 $              26,320 $         5,680 5 $                         1,680 $       32,000 $              28,000 $         4,000 Depreciation rate = Depreciable Value / Total production = (32000-4000)/10000 = $              2.8 per unit Depreciation expense: Year Units of production Unit Rate Depreciation Expenses 1 2100 $                     2.8 $    5,880 2 3100 $                     2.8 $    8,680 3 2100 $                     2.8 $    5,880 4 2100 $                     2.8 $    5,880 5 600 $                     2.8 $    1,680 Total 10000 $ 28,000 c.. Double Declining: Income Statement Balance Sheet Year Depreciation Expense Cost Accumulated Depreciation Book Value At Acquisition $       32,000 0 $       32,000 1 $                       12,800 $       32,000 $              12,800 $       19,200 2 $                         7,680 $       32,000 $              20,480 $       11,520 3 $                         4,608 $       32,000 $              25,088 $         6,912 4 $                         2,765 $       32,000 $              27,853 $         4,147 5 $                         1,659 $       32,000 $              29,512 $         2,488 Working: Straight Line rate = 1/5 = 20% Double declining rate = 2 *20% = 40% Year Beginning Book Value Deoreciation expense Ending Book Value a b a-b 1           32,000           12,800           19,200 2           19,200              7,680           11,520 3           11,520              4,608              6,912 4              6,912              2,765              4,147 5              4,147              1,659              2,488

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