Banko Inc. manufactures sporting goods. The following information applies to a m
ID: 2451736 • Letter: B
Question
Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1, 2016:
Determine the amount of depreciation expense for 2016 and 2017 using straight-line method.
Depriation expense 2016 2017
Determine the amount of depreciation expense for 2016 and 2017 using double-declining-balance method
Depriation expense 2016 2017
Determine the amount of depreciation expense for 2016 and 2017 using units of production method.
Depriation expense 2016 2017
Determine the amount of depreciation expense for 2016 and 2017 using MACRS, assuming that the machine is classified as seven-year property. (Round your answers to the nearest dollar amount.)
depriation expense 2016 2017
Purchase price $ 90,800 Delivery cost $ 4,000 Installation charge $ 3,000 Estimated life 5 years Estimated units 153,000 Salvage estimate $ 6,000Explanation / Answer
a.
Calculation of amount of depreciation expense using straight-line method:
Purchase price
$ 90,800
Add: Delivery cost
$ 4,000
Add: Installation charge
$ 3,000
Total Cost
$ 97,800
Estimated life
5 years
Estimated units
153000
Salvage estimate
$ 6,000
Formula :
Staright line depreciation = (Cost - Salvage value) / life in years
= (97800 - 6000) / 5 =
$ 18,360
Depreciation Expense for 2016
$ 18,360
Depreciation Expense for 2017
$ 18,360
b.
Calculation of amount of depreciation expense using double-declining-balance method:
Total Cost
$ 97,800
Depreciation rate = 2/ life = 2/5 =
40%
Formula : Depreciation = Book value * Depreciation rate
Depreciation Expense for 2016 = 97800 * 40% =
$ 39,120
Book Value at the end of year 2016 = 97800 - 39120
$ 58,680
Depreciation Expense for 2016 = 58680 * 40% =
$ 23,472
c.
Calculation of amount of depreciation expense using Units production method:
Total Cost
$ 97,800
Less: Salvage value
$ (6,000)
Net cost
$ 91,800
Formula : Depreciation = Net Cost* units produced / life in units
Depreciation Expense for 2016 = 91800*49000 / 153000
$ 29,400
Depreciation Expense for 2017 = 91800*51000 / 153000
$ 30,600
d.
Calculation of amount of depreciation expense using Units MACRS method:
Total Cost
$ 97,800
Formula : Depreciation = Cost* MACRS %
Depreciation Expense for 2016 = 97800*14.29%
$ 13,976
Depreciation Expense for 2017 = 97800*24.49%
$ 23,951
a.
Calculation of amount of depreciation expense using straight-line method:
Purchase price
$ 90,800
Add: Delivery cost
$ 4,000
Add: Installation charge
$ 3,000
Total Cost
$ 97,800
Estimated life
5 years
Estimated units
153000
Salvage estimate
$ 6,000
Formula :
Staright line depreciation = (Cost - Salvage value) / life in years
= (97800 - 6000) / 5 =
$ 18,360
Depreciation Expense for 2016
$ 18,360
Depreciation Expense for 2017
$ 18,360
b.
Calculation of amount of depreciation expense using double-declining-balance method:
Total Cost
$ 97,800
Depreciation rate = 2/ life = 2/5 =
40%
Formula : Depreciation = Book value * Depreciation rate
Depreciation Expense for 2016 = 97800 * 40% =
$ 39,120
Book Value at the end of year 2016 = 97800 - 39120
$ 58,680
Depreciation Expense for 2016 = 58680 * 40% =
$ 23,472
c.
Calculation of amount of depreciation expense using Units production method:
Total Cost
$ 97,800
Less: Salvage value
$ (6,000)
Net cost
$ 91,800
Formula : Depreciation = Net Cost* units produced / life in units
Depreciation Expense for 2016 = 91800*49000 / 153000
$ 29,400
Depreciation Expense for 2017 = 91800*51000 / 153000
$ 30,600
d.
Calculation of amount of depreciation expense using Units MACRS method:
Total Cost
$ 97,800
Formula : Depreciation = Cost* MACRS %
Depreciation Expense for 2016 = 97800*14.29%
$ 13,976
Depreciation Expense for 2017 = 97800*24.49%
$ 23,951
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.