Explanation Depreciation expense: Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolescence. Straight-line depreciation method: The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset is referred to as straight-line method. Units-of-production method: The depreciation method which assumes that the consumption of economic benefits of long-term asset is based on the production capacity or output is referred to as units-of-production method. Double-declining-balance method: The depreciation method which assumes that the consumption of economic benefits of long-term asset is high in the early years but gradually declines towards the end of its useful life is referred to as double-declining-balance method. Prepare a table showing depreciation expense under each depreciation method as follows: Year Straight-Line ($) (1) Units-of-Production ($) Double-Declining-Balance ($) (5) 1 58,800 71,120 (3) 129,600 2 58,800 64,080 (3) 77,760 3 58,800 63,400 (3) 46,656 4 58,800 68,720 (3) 27,994 5 58,800 26,680 (4) 11,990 Total $294,000 $294,000 $294,000 Table (1) Working Notes: Compute the depreciation expense per year using straight-line method. Depreciation = Acquisition cost − Salvage value Useful life = $324,000 − $ 30 , 000 5 years = $ 58 , 800 (1) Note: The depreciation expense under the straight-line method is same for every year. Compute depreciation per unit. Depreciation per unit = Asset cost – Residual value Estimated units of total production = $324,000–$30,000 475 , 000 units = $294,000 1 , 470 , 000 units = $0 .20 per unit (2) Prepare depreciation schedule under units-of-production method for Year 1 to Year 4. Year Depreciation per unit (A) (2) Units (B) Depreciation expense (in $) ( ( C ) = ( A ) × ( B ) ) 1 $0.20 355,600 71,120 2 $0.20 320,400 64,080 3 $0.20 317,000 63,400 4 $0.20 343,600 68,720 Table (2) …… (3) Compute depreciation expense on Year 5

24th Edition

ISBN: 9781260158601

Author: Wild

Publisher: MCG

See similar textbooks

Question

Chapter 10, Problem 2BP

To determine

Prepare a table and compute depreciation for each year for the machine under each depreciation method.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 10, Problem 1BP

Chapter 10, Problem 3BP

Students have asked these similar questions

On January 1, Manning Co. purchases and installs a new machine costing $324,000 with a five-year life and an estimated $30,000 salvage value. Management estimates the machine will produce 1,470,000 units of product during its life. Actual production of units is as follows: 355,600 in Year 1, 320,400 in Year 2, 317,000 in Year 3, 343,600 in Year 4, and 138,500 in Year 5. The total number of units produced by the end of Year 5 exceeds the original estimate—this difference was not predicted. Note: The machine cannot be depreciated below its estimated salvage value. Required: Prepare a table Units-of-production: Year Number of Units Depreciation per Unit Depreciation Expense 1 2 3 4 5 Totals Double-declining-balance: Year Beginning Book Value Annual Depreciation (40% of book value) Accumulated Depreciation at Year-End Ending Book Value ($324,000 Cost less Accumulated Depreciation) 1 2…

On January 2, Gannon Co. purchases and installs a new machine costing $312,000 with a five-year life and an estimated $28,000 salvage value. Management estimates the machine will produce 1,136,000 units of product during its life. Actual production of units is as follows: year 1: 245,600; year 2: 230,400; year 3: 227,000; year 4: 232,600; and year 5: 211,200. The total number of units produced by the end of year 5 exceeds the original estimate – this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.) Compute depreciation for each year (and total depreciation for all years combined) for the machine under straight-line and units-of-production depreciation methods. You will use the form for Problem 9 and then upload the form to this problem. Note: You do not have to use the area for calculating the units of production. This is just a work area. If you do use it, make sure that your final answers are put into the table with…

A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 475,000 units of product during its life. It actually produces the following units: 220,000 in 1st year, 124,600 in 2nd year, 121,800 in 3rd year, 15,200 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.) Required: Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places.)

Chapter 10 Solutions

Principles of Financial Accounting.

Ch. 10 - A company paid 326,000 for property that included...Ch. 10 - Prob. 2MCQ Ch. 10 - Prob. 3MCQ Ch. 10 - Prob. 4MCQ Ch. 10 - Prob. 5MCQ Ch. 10 - Prob. 1DQ Ch. 10 - Prob. 2DQ Ch. 10 - Prob. 3DQ Ch. 10 - Prob. 4DQ Ch. 10 - Prob. 5DQ

Ch. 10 - Why is the Modified Accelerated Cost Recovery...Ch. 10 - Prob. 7DQ Ch. 10 - Identify events that might lead to disposal of a...Ch. 10 - Prob. 9DQ Ch. 10 - Is the declining-balance method an acceptable way...Ch. 10 - Prob. 11DQ Ch. 10 - Prob. 12DQ Ch. 10 - Prob. 13DQ Ch. 10 - Prob. 14DQ Ch. 10 - Prob. 15DQ Ch. 10 - APPLE On its recent balance sheet in Appendix A,...Ch. 10 - Prob. 17DQ Ch. 10 - Prob. 18DQ Ch. 10 - Prob. 19DQ Ch. 10 - Prob. 20DQ Ch. 10 - Prob. 1QS Ch. 10 - Prob. 2QS Ch. 10 - Prob. 3QS Ch. 10 - Prob. 4QS Ch. 10 - Prob. 5QS Ch. 10 - Prob. 6QS Ch. 10 - On January 1, the Matthews Band pays 65,800 for...Ch. 10 - Prob. 8QS Ch. 10 - Revenue and capital expenditures 1. Classify the...Ch. 10 - Disposal of assets Garcia Co. owns equipment that...Ch. 10 - Prob. 11QS Ch. 10 - Prob. 12QS Ch. 10 - Prob. 13QS Ch. 10 - Prob. 14QS Ch. 10 - Prob. 15QS Ch. 10 - Caleb Co. owns a machine that had cost 42,400 with...Ch. 10 - Prob. 1E Ch. 10 - Prob. 2E Ch. 10 - Prob. 3E Ch. 10 - Prob. 4E Ch. 10 - Prob. 5E Ch. 10 - Prob. 6E Ch. 10 - NewTech purchases computer equipment for 154,000...Ch. 10 - Double-declining-balance depreciation In early...Ch. 10 - Straight-line depreciation and income effects P1...Ch. 10 - Double-declining-balance depreciation P1 Tory...Ch. 10 - Prob. 11E Ch. 10 - Prob. 12E Ch. 10 - Revising depreciation C2 Apex Fitness Club uses...Ch. 10 - Prob. 14E Ch. 10 - Prob. 15E Ch. 10 - Prob. 16E Ch. 10 - Prob. 17E Ch. 10 - Montana Mining Co. pays 3,721,000 for an ore...Ch. 10 - Milano Gallery purchases the copyright on a...Ch. 10 - Prob. 20E Ch. 10 - Prob. 21E Ch. 10 - Lok Co. reports net sales of 5,856,480 for Year 2...Ch. 10 - Prob. 23E Ch. 10 - Prob. 24E Ch. 10 - Prob. 1AP Ch. 10 - Prob. 2AP Ch. 10 - Prob. 3AP Ch. 10 - Prob. 4AP Ch. 10 - Yoshi Company completed the following transactions...Ch. 10 - Onslow Co. purchased a used machine for 178,000...Ch. 10 - On July 23 of the current year, Dakota Mining Co....Ch. 10 - On January 1, Falk Company signed a contract to...Ch. 10 - Nagy Company makes a lump-sum purchase of several...Ch. 10 - Prob. 2BP Ch. 10 - Prob. 3BP Ch. 10 - Prob. 4BP Ch. 10 - Prob. 5BP Ch. 10 - On January 1, Walker purchased a used machine for...Ch. 10 - Prob. 7BP Ch. 10 - Prob. 8BP Ch. 10 - Prob. 10SP Ch. 10 - Prob. 1AA Ch. 10 - Prob. 2AA Ch. 10 - Prob. 3AA Ch. 10 - Prob. 1BTN Ch. 10 - Prob. 5BTN

Knowledge Booster

Prepare a table and compute depreciation for each year for the machine under each depreciation method.

Solution Summary: The author explains how to calculate depreciation expense for each year using the straight-line method and the double-declining-balance method.

Prepare a table and compute depreciation for each year for the machine under each depreciation method.

Want to see the full answer?

Chapter 10 Solutions