for $110,000 with an expected life of 4 years or 800,00 units and a salvage prod
ID: 2595161 • Letter: F
Question
for $110,000 with an expected life of 4 years or 800,00 units and a salvage production of units in year one is 3200,000 in year two 200,000, in year s. Slone Co. purchases a machine three 200,000 and 100,000 in year four. for the 1 two years under (a) straight line,(b) double declining balance and (c)units of production. 6. Using the information given in problem 5 and using straight line depreciation, give the journal entry to record the scale of the machine at the end of the second-year of ase for $60,000Explanation / Answer
5.
Straight Line depreciation
Depreciation per year = (Cost – Salvage value) / No. of useful years
= (110,000 – 30,000) / 4
= 20,000 / Year
Year 1 = $20,000
Year 2 = $20,000
In Straight line, depreciation will be same every year
Double declining method
Straight line rate = 25% (i.e. 20,000/80,000 * 100)
Depreciation rate = 2*Straight line rate
= 2*25%
= 50%
Depreciation = Book value * Rate
Year 1 = 110,000*50% = $55,000
Year 2 = (110,000-55,000) * 50% = $27,500
Units of production method
Depreciable value = Cost – Salvage value
= 110,000 – 30,000
= 80,000
Depreciation = Year production / Total production * Depreciable value
Year 1 = 300,000/800,000 units * $80,000
Year 1= $30,000
Year 2 = 200,000/800,000 * $80,000
Year 2= $20,000
6.
Book value after year 2 = Cost – Depreciation of 2 year
= 110,000 – (20,000*2)
Book value after year 2 = $70,000
Cash (Dr.) 60,000
Loss on sale (Dr.) 10,000
Machine (Cr) 70,000
(Being machine sold at 10,000 loss)
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