O eztomheducationoom/hm.tpx M |·.. Banko Inc. manufactures sporting goods. The f

Question

O eztomheducationoom/hm.tpx M |·.. Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1, 2016: Purchase price Delivery cost Installation charge Estimated life Estimated units Salvage estimate $ 82,500 $ 3,000 S 1,000 5 years 157,000 8,000 During 2016, the machine produced 53,000 units and during 2017, it produced 55,000 units Required: a. Determine the amount of depreciation expense for 2016 and 2017 using straight-Hine method 2016 Depreciation expense Determine the amount of depreciation expense for 2016 and 2017 using double-declining-balance method b. 2016 2017 Depreciation expense c. Determine the amount of depreciation expense for 2016 and 2017 using units of production method 2016 2017 Depreciation expense Type here to search

Explanation / Answer

Assets value = $82,500 + $3,000 + $1,000 = $86,500

a. Depreciation on SLM basis:

Depreciation = (Assets value - Residual value) / Life of assets
= ($86,500 - $8,000) / 5 years = $15,700

b. Depreciation using Double decline balance method

SLM rate = 5 year = 20%
Double decline balance method rate = 20 x 2 = 40%

Depreciation 2016 = $86,500 x 40% = $34,600
Depreciation 2017 = ($86,500 - $34,600) x 40% = $20,760

3.Depreciation using units of production method:

Depreciation 2016 = $86,500 x 53,000/157,000 = $29,201
Depreciation 2017 = $86,500 x 55,000/157,000 = $30,303

  

2016 2017 Depreciation expense $15,700 $15,700

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