Banko Inc. manufactures sporting goods. The following information applies to a m
ID: 2578340 • Letter: B
Question
Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1, 2016:
During 2016, the machine produced 41,000 units and during 2017, it produced 43,000 units.
Required: a. Determine the amount of depreciation expense for 2016 and 2017 using straight-line method.
b. Determine the amount of depreciation expense for 2016 and 2017 using double-declining-balance method.
c. Determine the amount of depreciation expense for 2016 and 2017 using units of production method.
d. Determine the amount of depreciation expense for 2016 and 2017 using MACRS, assuming that the machine is classified as seven-year property. (Round your answers to the nearest dollar amount.)
MACRS table:
Purchase Price $ 86,000 Delivery Cost $2,000 Installation Charge $1,000 Estimate Life 5 years Estimated Units 145,000 Salvage Estimate $ 2,000Explanation / Answer
(a) 2016 2017 Depn Uunder SLM 17,400 17,400 Machine Cost Purchase Price 86,000 Delivery Cost 2,000 Installation Charges 1,000 Total Cost Of M/C 89,000 Less: Salvage Value 2,000 87,000 Life of Asset (Years) 5 Depn P.a under SLM 17,400 (b) DDB Cost of Machine 89,000 Salvage Value 2,000 Double of SLM=17400*2 17400*2 (89000-2000-34800)*40% 2,016 2017 34,800 20,880 ( C) Depreciation using production method 2,016 2017 Cost less Salvage 87,000 Full Capacity of Machine 1,45,000 Cost per unit(87k/145k) 0.60 No of units produced 41,000 43000 Depn per unit 0.60 0.6 Depreciation 24,600 25,800 Depn Under MACRS Cost of property 89,000 89,000 Depn Rate 14.29% 24.49% Depn 12,718 21,796
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