13 value: 1.00 points E9-6 Computing Depreciation under Alternative Methods [LO
ID: 2400367 • Letter: 1
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13 value: 1.00 points E9-6 Computing Depreciation under Alternative Methods [LO 9-3] Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $32,000. The estimated useful life was five years and the residual value was $4,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production for year 1, 2,100 units, year 2, 3,100 units; year 3, 2,100 units; year 4, 2,100 units; and year 5, 600 units. Required: 1. Complete a depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.) a. Straight-line. Income Statement Depreciation Expense Balance Sheet Accumulated Book Value Depreciation Year Cost At acquisition 2 4Explanation / Answer
CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR MACHINE Purchase Cost of Machine $ 32,000.00 Less: Salvage Value $ 4,000.00 Net Value for Depreciation $ 28,000.00 Usefule life of the Assets 5 years Depreciation per year = Value for Depreciation / 5 years = 5,600.00 Total Depreciation Per year = $ 5,600.00 DEPRECIATION SCHEDULE - Straight Line Income Statement Balance Sheet Year Depreciation Expenses Cost Accumulation Depreciation Book Value At Acquisition $ 32,000.00 $ 32,000.00 1 $ 5,600.00 $ 5,600.00 $ 26,400.00 2 $ 5,600.00 $ 11,200.00 $ 20,800.00 3 $ 5,600.00 $ 16,800.00 $ 15,200.00 4 $ 5,600.00 $ 22,400.00 $ 9,600.00 5 $ 5,600.00 $ 28,000.00 $ 4,000.00 CALCULATION OF THE DEPRECIATION AS PER UNITS OF PRODUCTION Purchase Cost of Machine $ 32,000.00 Less: Salvage Value $ 4,000.00 Net Value for Depreciation $ 28,000.00 Expected to production in Units 10,000.00 Units Depreciation per Hours = 2.80 Per Units ($ 84,000 / 525,000 Units) Depreciation for Year 1 (2100 Units X 2.80) $ 5,880.00 Depreciation for Year 2 (3100 Units X 2.80) $ 8,680.00 Depreciation for Year 3 (2100 Units X 2.80) $ 5,880.00 Depreciation for Year 4 (2100 Units X 2.80) $ 5,880.00 Depreciation for Year 5 (600 Units X 2.80) $ 1,680.00 DEPRECIATION SCHEDULE - Unit of production Income Statement Balance Sheet Year Depreciation Expenses Cost Accumulation Depreciation Book Value At Acquisition $ 32,000.00 $ 32,000.00 1 $ 5,880.00 $ 5,880.00 $ 26,120.00 2 $ 8,680.00 $ 14,560.00 $ 17,440.00 3 $ 5,880.00 $ 20,440.00 $ 11,560.00 4 $ 5,880.00 $ 26,320.00 $ 5,680.00 5 $ 1,680.00 $ 28,000.00 $ 4,000.00 CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD Purchase Cost of Machine $ 32,000.00 Useful Life = 5 years Depreciation per year = $ 6,400.00 (Purchase price / Useful life) Rate of Depreciation = 0.20 or 20% (Depreication / Purchase price ) Double decline deprection rate = 20% * 2 = 40.0% Purchase Value of the year 1 = $ 32,000.00 Depreciation for the year 1 $ 12,800.00 Closing balance for the year 1 $ 19,200.00 Opening Balance for the year 2 $ 19,200.00 Depreciation for the year 2 $ 7,680.00 Closing balance for the year 2 11,520.00 Opening Balance for the year 3 $ 11,520.00 Depreciation for the year 3 $ 4,608.00 Closing balance for the year 3 6,912.00 Opening Balance for the year 4 $ 6,912.00 Depreciation for the year 4 $ 2,764.80 Closing balance for the year 4 4,147.20 Opening Balance for the year 5 $ 4,147.20 Depreciation for the year 5 $ 1,658.88 Closing balance for the year 5 2,488.32 DEPRECIATION SCHEDULE - DOUBLE DECLINE Income Statement Balance Sheet Year Depreciation Expenses Cost Accumulation Depreciation Book Value At Acquisition $ 32,000.00 $ 32,000.00 1 $ 12,800.00 $ 12,800.00 $ 19,200.00 2 $ 7,680.00 $ 20,480.00 $ 11,520.00 3 $ 4,608.00 $ 25,088.00 $ 6,912.00 4 $ 2,764.80 $ 27,852.80 $ 4,147.20 5 $ 1,658.88 $ 29,511.68 $ 2,488.32
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