Rita pita company bought a new dough machine at thebeginning of the yar at ta co

Question

Rita pita company bought a new dough machine at thebeginning of the yar at ta cost of $7600. the estimated useful lifewas four years and the residual value was $800. assume that theestimated productive life of the machines was 10000 hours. actualannual usage was 3500 hours in year 1. 3200 hours in year 2. 2200hours in year 3. 1100 in years 4. complete a separeate depreciation schedule for each of thealternative methods. u can round your answers to nearsdollar. a. stright line b. units of production c. double delining balance method: year               computation         depreciationexpense      accumulationexpense       net book value 2. assuming that the machine was used directly in theproduction of one of the products that the company manufactures andsells, what factors might managment consider in selecting apreferable depreciation method in conformity with the matchingprinciple? Rita pita company bought a new dough machine at thebeginning of the yar at ta cost of $7600. the estimated useful lifewas four years and the residual value was $800. assume that theestimated productive life of the machines was 10000 hours. actualannual usage was 3500 hours in year 1. 3200 hours in year 2. 2200hours in year 3. 1100 in years 4. complete a separeate depreciation schedule for each of thealternative methods. u can round your answers to nearsdollar. a. stright line b. units of production c. double delining balance method: year               computation         depreciationexpense      accumulationexpense       net book value 2. assuming that the machine was used directly in theproduction of one of the products that the company manufactures andsells, what factors might managment consider in selecting apreferable depreciation method in conformity with the matchingprinciple?

Explanation / Answer

Methods

Year

Computation

Depreciation

Accumulated

Net book value

Expense

Depreciation

( 7600 - 1700)

(5900 -1700)

(4200 - 1700)

(2500 - 1700)

(7600 - 2380)

(5220 - 2176)

(3044 -1496)

(1548 -748)

(7600 -3800)

(3800 -1900)

(1900 - 950)

Cost of Machine $7,600 Scrap value $800 Life 4 years Total estimated production 10000 hrs Actual used hours 3500 hrs year 1 3200 hrs year 2 2200 hrs year 3 1100 hrs year 4 Double declining rate = 2 * 1/4 = 50%

Methods

Year

Computation

Depreciation

Accumulated

Net book value

Expense

Depreciation

Straight line method year 1 ($7600 - $800) / 4 $1,700 $1,700 $5,900

( 7600 - 1700)

year 2 same $1,700 $3,400 $4,200

(5900 -1700)

year 3 same $1,700 $5,100 $2,500

(4200 - 1700)

year 4 same $1,700 $6,800 $800

(2500 - 1700)

Units of Production year 1 ($7600 - 800) * 3500 / 10000 $2,380 $2,380 $5,220

(7600 - 2380)

year 2 ($7600 - 800) * 3200 / 10000 $2,176 $4,556 $3,044

(5220 - 2176)

year 3 ($7600 - 800) * 2200 / 10000 $1,496 $6,052 $1,548

(3044 -1496)

year 4 ($7600 - 800) * 1100 / 10000 $748 $6,800 $800

(1548 -748)

Double declining year 1 $7600 X 50% $3,800 $3,800 $3,800

(7600 -3800)

balance method year 2 $3800 X 50% $1,900 $5,700 $1,900

(3800 -1900)

year 3 $1900 X 50% $950 $6,650 $950

(1900 - 950)

year 4 $150 $6,800 $800 Book value is never less than scrapvalue Units of production method ispreferable depreciation method in confirmity with the matchingprinciple

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