Question

For your analysis, you have been asked to compare methods based on a machine that cost...

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

Homework Answers

Answer #1

SOLUTION:- CALCULATION OF DEPRECIATION:-

METHOD YEAR1 YEAR 2

STRAIGHT LINE METHOD

COST- SCRAP VALUE/ USEFUL LIFE OF ASSET

176000-33440/10=14256 176000-33440-14256/9=14256

UNITS OF PRODUCTION METHOD

(COST -SCRAPVALUE/TOTAL NO OF UNITS)* ACTUAL NO OF UNITS

(176000-33440/216000)*28000=18480 (176000-33440/216000)*24000=15840

double 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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