100 points Brief Exercise 7-8 Calculate depreciation (LO7-4) Hawaiian Specialty
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100 points Brief Exercise 7-8 Calculate depreciation (LO7-4) Hawaiian Specialty Foods purchased equipment or s 18 oou Rea dua valu?8t 1 e end ot ?? esti ated to ea service lite is expected to be $1 80U he machine operated tor 2 300 hours in he first year, and he oompeny expects he machine to operate or a total of 15 Calculate depncciation axpansa for the first year using ach af ths folowing dapraciation mathods:(1) straight lins 2) double-declining-halanc,and (3) actvity-based Do nat round your intermediate calculations.) O hour (1) Etreight-ine 12)Explanation / Answer
(a)Depreciation Using Straight Line Method
Depreciation = ( Cost of the asset – Salvage Value ) / Usefull Life
= ( $18,000 - $1,800 ) / 4 Years
= $4,050
(b) Depreciation Using Double Declining Balance Method
Double Declining Depreciation = 2 x Straight Line Depreciation Rate x Book Value Beginning
Straight Line Depreciation Rate = 1 / Usefull life
= 1/4 Years
= 25%
Double Declining Depreciation = 2 x 0.25 x $18,000
= $9,000
(c) Depreciation Using Activity Method
Depreciation = [(Cost of Asset - Residual Value) / Estimated Total Production] x Actual Production
Depreciation = ($18000 - $1800 ) x (2300 Units / 15000 Units)
= $2,484
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