Question

On January 1, 2016, Sparks Company purchased for $360,000 snow-making equipment having an estimated useful life...

On January 1, 2016, Sparks Company purchased for $360,000 snow-making equipment having an estimated useful life of 8 years with an estimated salvage value of $25,000 and 500,000 units expected to be produced. Depreciation is taken for the portion of the year the asset is used.

(a) Complete the form below by determining the depreciation expense and year-end book values of 2015 and 2016 using the

1. Straight Line Method

2. Production assuming 50,000 units produced in 2016 and 60,000 in 2017.

3. Double-declining balance method.

Notes: Show all calculations and round to whole dollar when necessary.

Business   Accounting   
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Homework Answers

Answer #1

1.

Particulars 2016 2017
Book Value $360000 $318125

Depreciation Expense

Straight line (Book value-Residual Value/No of years)

 $ 41875 $ 41875
Workings (360000-25000/8)
Year End Book Values $318125 $276250

2. Production Method

Particulars 2016 2017
Book Value 360000 324000
Depreciation(B.value/est. production*actual production)

36000

 43200
Working (360000/500000*50000) (360000/500000*60000)
year end b.value 324000 280800

3.Double declining method

Particulars 2016 2017
Book Value 360000 315000

Depreciation =

Book Value/Est years

 45000 39375
Working 360000/8 315000/8
Year End Book Value 315000 275625
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