7 . Certog Company purchased a new machine on January 1, 2006, at a cost of $150

Question

7. Certog Company purchased a new machine on January 1, 2006, at a cost of $150,000. The machine expected to have an eight-year life and a $15,000 salvage value. he machine is expected to produce 675,00 finished products during its eight-year life. Production during 2006 was 70,000 units and during 2007 was 110,000 units.

Required: Determine the amount of depreciation expense to be recorded on the machine for the years 2006 and 2007 under each of the following methods:

a. straight line

b. units of production

c. double declining balance

Explanation / Answer

a. straight line

Calculation is : (150000-15000)/8=16875

b. units of production

Unit Cost :135000/585000=$0.23

c. double declining balance

Year Depriciation Amount 2006 16875 2007 16875 2008 16875 2009 16875 2010 16875 2011 16875 2012 16875 2013 16875

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