Question

Marigold Company purchased Machine #201 on May 1, 2020. The following information relating to Machine #201 was gathered at the end of May.

Price		$91,800
Credit terms		2/10, n/30
Freight-in		$ 864
Preparation and installation costs		$ 4,104
Labor costs during regular production operations		$11,340

It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Marigold intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,620. The invoice for Machine #201 was paid May 5, 2020. Marigold uses the calendar year as the basis for the preparation of financial statements.

Compute the depreciation expense for the years indicated using the following methods.

				Depreciation Expense
(1)		Straight-line method for 2020		$enter a dollar amount
(2)		Sum-of-the-years'-digits method for 2021		$enter a dollar amount
(3)		Double-declining-balance method for 2020		$enter a dollar amount

  

  

Suppose Barbara Jones, the president of Marigold, tells you that because the company is a new organization, she expects it will be several years before production and sales reach optimum levels. She asks you to recommend a depreciation method that will allocate less of the company’s depreciation expense to the early years and more to later years of the assets' lives.

What method would you recommend?

select a method                                                                       Activity MethodDecreasing Change MethodSpecial Depreciation MethodStraight-line Method

Answer 1