For your analysis, you have been asked to compare methods based on a machine tha
ID: 2603322 • Letter: F
Question
For your analysis, you have been asked to compare methods based on a machine that cost $176,000. The estimated useful life is 10 years, and the estimated residual value is $33,440. The machine has an estimated useful life in productive output of 216,000 units. Actual output was 28,000 in year 1 and 24,000 in year 2. Required: 1. For years 1 and 2 only, prepare separate depreciation schedules assuming: (Do not round intermediate calculations and round your final answers to the nearest dollar amount.) a. Straight-line method; b). units of production method; and c) double declining method Please use exact numbers
Explanation / Answer
SOLUTION:- CALCULATION OF DEPRECIATION:-
STRAIGHT LINE METHOD
COST- SCRAP VALUE/ USEFUL LIFE OF ASSET
UNITS OF PRODUCTION METHOD
(COST -SCRAPVALUE/TOTAL NO OF UNITS)* ACTUAL NO OF UNITS
double declining method
rate of depreciation=(1/useful life)*200%
(1/5)*200%
=40%
176000*40%=70400
balance=105600
105600*40%=42240
balance=63360
METHOD YEAR1 YEAR 2STRAIGHT LINE METHOD
COST- SCRAP VALUE/ USEFUL LIFE OF ASSET
176000-33440/10=14256 176000-33440-14256/9=14256UNITS OF PRODUCTION METHOD
(COST -SCRAPVALUE/TOTAL NO OF UNITS)* ACTUAL NO OF UNITS
(176000-33440/216000)*28000=18480 (176000-33440/216000)*24000=15840double declining method
rate of depreciation=(1/useful life)*200%
(1/5)*200%
=40%
176000*40%=70400
balance=105600
105600*40%=42240
balance=63360
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