Question
Solar Innovations Corporation bought a machine at the beginning of the year at a cost of...
|
Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $32,000. The estimated useful life was five years and the residual value was $4,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production for year 1, 2,100 units; year 2, 3,100 units; year 3, 2,100 units; year 4, 2,100 units; and year 5, 600 units. |
| Required: | |
| 1. |
Complete a depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.) |
| a. | Straight-line. |
| b. | Units-of-production. |
| c. | Double-declining-balance. |
Homework Answers
Answer #1
(a) STRAIGHT LINE METHOD
Formula: Annual depreciation =
[original cost - salvage value]/estimated useful life
Therefore, annual depreciation = [$32000 - $4000]/5
= $5600 each year
(b) UNITS OF PRODUCTION METHOD
Formula: Annual depreciation = 
Therefore, 
depreciation for year
1
= $5880
Depreciation for year 2
= $8680
Depreciation for year 3
= $5880
Depreciation for year 4
= $5880
Depreciation for year 5
= $15680
(c) Double declining balance method
Formula: annual depreciation = 2 x Straight line depreciation percent x book value at the beginning of the period
Straight line depreciation percent = ($5600/$28000) x 100 = 20%
Therefore, depreciation for year 1
2 x 20% x $32000 = $12800
Depreciation for year 2
2 x 20% x ($32000 - $12800) = $7680
Depreciation for year 3
2 x 20% x ($19200 - $7680) = $4608
Depreciation for year 4
2 x 20% x ($11520 - $4608) = $2764.8
Depreciation for year 5
2 x 20% x ($6912 - 2764.8) = $1658.88
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