Shining Cookie Company, Inc., in Murfreesboro, TN bought a new ice cream maker a

Question

Shining Cookie Company, Inc., in Murfreesboro, TN bought a new ice cream maker at the beginning of the year at a cost of $14,000. The estimated useful life was four years, and the residual value was $980. Assume that the estimated productive life of the machine was 9,300 hours. Actual annual usage was 3,720 hours in year 1: 2,790 hours in year 2, 1,860 hours in year 3; and 930 hours in year 4. Required: 1. Complete a separate depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.) a. Straight-line. dNet At acquisition b. Units-of-production (use four decimal places for the per unit output factor). ed Net Book Value At acquisition c. Double-declining-balance. Deprec Book Value At acquisition

Explanation / Answer

1) a. Staight Line Year Depreciation expense Accumulated depreciation Net Book Value At acquisition 0 0 $       14,000 1 $       3,255 $         3,255 $       10,745 2 $       3,255 $         6,510 $         7,490 3 $       3,255 $         9,765 $         4,235 4 $       3,255 $       13,020 $             980 Working: Straight Line depreciation = (Cost -Salvage value)/Useful Life = (14000-980)/4 = $         3,255 b.Units of production Year Depreciation expense Accumulated depreciation Net Book Value At acquisition 0 0 $       14,000 1 $       5,208 $         5,208 $         8,792 2 $       3,906 $         9,114 $         4,886 3 $       2,604 $       11,718 $         2,282 4 $       1,302 $       13,020 $             980 Working: Per unit depreciation expenses = Depreciable cost/Total estimated life in hours = (14000-980)/9300 = $       1.4000 Year Usage in hours per hour rate Depreciation expense 1           3,720 $ 1.4000 $       5,208 2           2,790 $ 1.4000 $       3,906 3           1,860 $ 1.4000 $       2,604 4               930 $ 1.4000 $       1,302 c. Double declining balance Year Depreciation expense Accumulated depreciation Net Book Value At acquisition 0 0 $       14,000 1 $       7,000 $         7,000 $         7,000 2 $       3,500 $       10,500 $         3,500 3 $       1,750 $       12,250 $         1,750 4 $           875 $       13,125 $             875 Working: Straight Line rate 1/4 = 25% Double declining rate = 2 x 25% = 50% Year Beginning Book Value Depreciation expense Ending Net book Value a b=a*50% a-b At acquisition 0 0 $       14,000 1 $     14,000 $         7,000 $         7,000 2 $       7,000 $         3,500 $         3,500 3 $       3,500 $         1,750 $         1,750 4 $       1,750 $             875 $             875

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