1. Duggin Corp. purchased equipment with a cost of $70,000 at the beginning of 2
ID: 1175062 • Letter: 1
Question
1. Duggin Corp. purchased equipment with a cost of $70,000 at the beginning of 2017. The equipment has an estimated life of 25 years or 25,000 units of product. The estimated residual value is $7,500. During 2017, 1,100 units of product were produced with this machinery. Determine the following:
A.
Amount of total accumulated depreciation at December 31, 2017, using units-of-production depreciation
B.
Book value at the end of 2017 using straight-line depreciation
C.
Why would the company choose units-of-production depreciation instead of straight-line?
2. Red Skys, Inc. purchased equipment at the beginning of 2016 for $140,000. The company decided to depreciate the equipment over a 10-year period using the double-declining-balance method. The company estimated the equipment's salvage value at $12,000. Show how the costs should be presented on Red Sky's financial statements at December 31, 2017. Label the statements properly.
A.
Amount of total accumulated depreciation at December 31, 2017, using units-of-production depreciation
B.
Book value at the end of 2017 using straight-line depreciation
C.
Why would the company choose units-of-production depreciation instead of straight-line?
Explanation / Answer
As per chegg guidelines we answer one question per post. Kindly post remaining questions in next post Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Cost of equipment 70,000.00 Residual Value 7,500.00 Life in Units 25,000.00 Depreciation er unit = (70000 - 7500)/25000 2.50 A) Depreciation for 2017 = 1100*2.5 2,750.00 B) Straight Line depreciation = (70000-7500)/25 2,500.00 Book Value at end of 2017 = 70000 - 2500 67,500.00 C) Company may choose Units of production because of higher depreciation in initial years and basis on no of units machine is actually used
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