A machine that produces cellphone components is purchased on January 1, 2016, fo

Question

A machine that produces cellphone components is purchased on January 1, 2016, for $139,000. It is expected to have a useful life of four years and a residual value of $11,000. The machine is expected to produce a total of 200,000 components during its life, distributed as follows: 40,000 in 2016 50,000 in 2017; 60,000 in 2018; and 50,000 in 2019. The company hasa December 31 year end Calculate the amount of depreciation to be charged each year, using each of the following methods: Rate Straight-line method depreciation ii. Units-of-production method (Round "per unit" answer to 2 decimal places, e.g. 15.25.) Units-o°roduction method depreciation 2015 2017 2015 2019 per year per unit Year 2016 2017 2018 2019 i. during tha first two yea? ii over all four yeara?

Explanation / Answer

Straight line method of depreciation = (cost - salvage value)/estimated useful life                                                                   = (139000-11000)/4 32000 i) Striaght line method depreciation $32,000 per year units production (139000-11000)/200,000 0.64 ii) unit of production method depreciation $0.64 per unit year 2016 25600 2017 32000 2018 38400 2019 32000 iii) double decling rate = 1/4*2= 50.00% year 2016 69500 (139000*50%) 2017 34750 (69500*50%) 2018 17375 (34750*50%) 2019 6375 (17375-11000) i) Ddouble declining ii) All provides same depreciation in all four years

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