Question

1. Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $85,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 82,000 units of product. Determine the machines' second year depreciation under the units-of-production method.

Select one:

a. $16,900

b. $15,600

c. $15,990

d. $17,425

e. $20,880

2. Victoria Company purchased a depreciable asset on January 1, Year 1 at a cost of $80,000. The asset is expected to have a salvage value of $10,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's depreciation expense for Year 1 will be:

Select one:

a. $8,000

b. $28,000

c. $70,000

d. $16,000

e. $32,000

Answer 1

Solution:

1. Given Data

Cost of the Machine at Beginig Year = $85,000 ,

Salvage value = $ 7,0000,

Annual Deperecitaion = (Cost - Salvage Value)/ Useful Life,

= ($ 85,000 - $ 7,000)/5 Years,

= $ 78,000 / 5 Years,

= $ 15,600 / Year,

Hence Second year Depreciation = $ 15,600.

Option B $15,600 is right answer.

2. Given Data:

Asset Value = $ 1,00,000,

Salvage Value = $ 10,000,

Deprecation rate as per Straight line method = 100 %/ 5 Year,

= 20% Year,

Hence Depreciationrate as per Double Decline

= 2 * Depreciation rate as per Straight line method * Begning value of each period,

= 2 * 20% *$ 80,000,

= 40 % * $ 80,000,

= $ 32,000,

Hence the Assets Depreciaiton Expense for Year 1 is $ 32,000,

Option E is the Correct Answer.

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