Depreciation Methods On January 2, 2015, Roth, Inc. purchased a laser cutting ma
ID: 2564490 • Letter: D
Question
Depreciation Methods
On January 2, 2015, Roth, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $120,000, and its estimated useful life was four years or 1,150,000 cuttings, after which it could be sold for $5,000.
Required
a. Calculate each year’s depreciation expense for the machine's useful life under each of the following depreciation methods (round all answers to the nearest dollar):
1. Straight-line.
2. Double-declining balance.
3. Units-of-production. (Assume annual production in cuttings of 280,000; 430,000; 360,000; and 80,000.)
1. Straight-Line
2. Double-declining balance
3. Units of Production
b. Assume that the machine was purchased on July 1, 2015. Calculate each year’s depreciation expense for the machine's useful life under each of the following depreciation methods:
1. Straight-line.
2. Double-declining balance.
1. Straight-Line
2. Double-declining balance (Round answers to the nearest whole number, when appropriate.)
Year Depreciation
Expense 2015 $Answer 2016 Answer 2017 Answer 2018 Answer
Explanation / Answer
Depreciable value = Cost - Salvage value = 120,000-5000 = $115,000
a )SLM = 115000 / 4 = 28750 PER YEAR
b) Double declining balance = 1/4 = 20% X 2 = 40% depreciation
3. Units of production method = Depreciable value / Estimated cuttings X Cuttings in that yr
B) July 1 2015
SLM = 115000 / 4 = 28750 x 6/12 = 14375 for 2015 and 2019. All other years will be 28750.
Units of production method = Depreciable value / Estimated cuttings X Cuttings in that yr
For the last yr - 2019 , the units are not given so i have assumed half of the 1st yr itself . Kindly check with your book for this.
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Year Depreciation exp 2015 =120000 X 40% = 48000 2016 =(120000 - 48000) X 40% = 28800 2017 = (120000 - 48000 - 28800 ) X 40% = 17280 2018 = (43200 - 17280 )X 40% = 10368 2019 =(25920 - 10368) X 40% = 6221Related Questions
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