Sneetch Inc. purchased a star-making machine on 1/1/2011. The cost of the machin

Question

Sneetch Inc. purchased a star-making machine on 1/1/2011. The cost of the machine was $21,000. Its estimated residual value was $1,600 at the end of an estimated 10-year life. (a) Calculate depreciation expense for 2011 and 2012 using the straight-line method (Omit the "S" sign in your response.) (b) Calculate depreciation expense for 2011 and 2012 using the double-declining balance method (Omit the "$" sign in your response.) (c) Calculate the net book value of the machine as of 12/31/2012 under straight-line depreciation. (Omit the "$" sign in your response.) (d) Calculate the net book value of the machine as of 12/31/2012 under double-declining-balance depreciation (Omit the "S" sign in your response.)

Explanation / Answer

(a)

Calculation of Depreciation expense :

(Using Straight Line method)

Formula:

Depreciation = (Cost - Residual value ) / Life in years

= (21000-1600) / 10

$                                                                 1,940.00

For 2011

$1,940.00

For 2012

$1,940.00

(b)

Calculation of Depreciation expense :

(Double declining method)

Formula:

Depreciation = Book Value * 2 / life

For Year 2011:

Depreciation = 21000*2/10 = $4200

For Year 2012:

Depreciation = (21000-4200)*2/10 = $3360

(c)

Calculation of Net book value :

(Using Straight Line method)

For Year 2011:

Cost

$   21,000

Less: Depreciation for 2011

$    (1,940)

Net book value =

$   19,060

For Year 2012:

Beginning Book Value

$   19,060

Less: Depreciation for 2012

$    (1,940)

Net book value =

$   17,120

(d)

Calculation of Net book value :

(Double declining method)

For Year 2011:

Cost

$   21,000

Less: Depreciation for 2011

$    (4,200)

Net book value =

$   16,800

For Year 2012:

Beginning Book Value

$   16,800

Less: Depreciation for 2012

$    (3,360)

Net book value =

$   13,440

(a)

Calculation of Depreciation expense :

(Using Straight Line method)

Formula:

Depreciation = (Cost - Residual value ) / Life in years

= (21000-1600) / 10

$                                                                 1,940.00

For 2011

$1,940.00

For 2012

$1,940.00

(b)

Calculation of Depreciation expense :

(Double declining method)

Formula:

Depreciation = Book Value * 2 / life

For Year 2011:

Depreciation = 21000*2/10 = $4200

For Year 2012:

Depreciation = (21000-4200)*2/10 = $3360

(c)

Calculation of Net book value :

(Using Straight Line method)

For Year 2011:

Cost

$   21,000

Less: Depreciation for 2011

$    (1,940)

Net book value =

$   19,060

For Year 2012:

Beginning Book Value

$   19,060

Less: Depreciation for 2012

$    (1,940)

Net book value =

$   17,120

(d)

Calculation of Net book value :

(Double declining method)

For Year 2011:

Cost

$   21,000

Less: Depreciation for 2011

$    (4,200)

Net book value =

$   16,800

For Year 2012:

Beginning Book Value

$   16,800

Less: Depreciation for 2012

$    (3,360)

Net book value =

$   13,440

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