Morgana Film Productions Inc. purchased a copier on Jan 1, 2011 for $11,000 with

Question

Morgana Film Productions Inc. purchased a copier on Jan 1, 2011 for $11,000 with a residual value of $1500. Useful life is 5 years or 100,000 copies Copies produced in 2011: 18000 copies; in 2012: 11,000 copies 1. Using the Straight Line Method, calculat: 2. Using the Activity/Units of Production Method, calculate: 3. Using the Double Declining Balance Method, calculate: a) The Depreciation Expense in 2011 & 2012 in 2011 in 2012 b) Accumulated depreciation at the end of 2012 c) Book value at the end of 2012

Explanation / Answer

1. (a) Using straight line dep :

Straight line dep = (11000-1500/5) = 1900 per year

2011 dep= $1900

2012 dep = $1900

b) Accumlated depreciation at the end of 2012 = 1900*2= 3800

c) Book value at the end of 2012 = 11000-3800 = 7200

2. (a) Using activity/unit of production method :

unit of production dep = (11000-1500/100000) = 0.095 per copies

2011 dep= 0.095*18000 = 1710

2012 dep = 0.095*11000 = 1045

b) Accumlated depreciation at the end of 2012 = 1710+1045 = 2755

c) Book value at the end of 2012 = 11000-2755 = 8245

3. (a) Using double decline dep :

Straight line rate = 100/5 = 20%

Double line rate = 20*2 = 40%

2011 dep= 11000*40% = 4400

2012 dep = 11000*60%*40% = 2640

b) Accumlated depreciation at the end of 2012 = 4400+2640 = 7040

c) Book value at the end of 2012 = 11000-7040 = 3960

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