Name(s) Class Time In-Class Case #7 Chapter 7 Yummy Ice Cream Company bought a n
ID: 2576509 • Letter: N
Question
Name(s) Class Time In-Class Case #7 Chapter 7 Yummy Ice Cream Company bought a new ice cream maker at the beginning of the year at a cost of $9,000. The estimated useful life was four years, and the residual (salvage) value was $1,000. Assume that the estimated Actual machine usage: 5,500 hours in year 1; 3,800 hours in year 2; 3,200 hours in year 3; 3,500 hours in year 4. Required Compute depreciation expense and accumulated depreciation for the ice cream maker asset for years 1 and 2 using: a) Straight-line; b) Double-declining balance; and c) Units-of-production.Explanation / Answer
Answer:
1
a. Straight-line
= (Cost-salvage value) /Life
=(9000-1000) / 4 years
=8000/4000
=$2,000 deprecation each year
Year
Depreciation
Accumulated
Depreciation
Net book
value
A
B
C=9000-B
1
2000
2000
7000
2
2000
4000
5000
_____________________________________________
2
Double Declining method
In Double Declining method we take the double rate than what we take in the straight line method
SO ,DDB rate is
=2 *(100/4)
=2 *25%
=50%
Year
Beijing
Value
Rate of
depreciation
calculation of
Depreciation
Depreciation
Accumulated
Depreciation
Net book
value
1
9000
50%
9000*50%
4500
4500
4500
2
4500
50%
4500*50%
2250
6750
2250
________________________________________
3
.Units-of-production Method
= (Cost-salvage value) / Total hours during the life
=(9000-1000) / 16000 hours
=8000/16,000
=$0.50 deprecation per hour
Year
Hours
Calculation of
depreciation
Depreciation
Accumulated
Depreciation
Net book
value
A
B=A*0.50
C
D
E=9000-D
1
5500
5500*0.50
2750
2750
6250
2
3800
3800*0.50
1900
4650
4350
Year
Depreciation
Accumulated
Depreciation
Net book
value
A
B
C=9000-B
1
2000
2000
7000
2
2000
4000
5000
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