18. 2.00 points E9-15 Computing Depreciation and Book Value for Two Years Using
ID: 2400377 • Letter: 1
Question
18. 2.00 points E9-15 Computing Depreciation and Book Value for Two Years Using Alternative Depreciation Methods and Interpreting the Impact on the Fixed Asset Turnover Ratio [LO 9-3, LO 9-7 Torge Company bought a machine for $99,000 cash. The estimated useful life was five years and the estimated residual value was $6,000. Assume that the estimated useful life in productive units is 201,000 Units actually produced were 53,600 in year 1 and 60,300 in year 2. Required: 1. Determine the appropriate amounts to complete the following schedule. (Do not round intermediate calculations. Depreciation Expense for Book Value at the End of Method of Depreciation Year 1 Straight-line Units-of-production Double-declining-balance Year 2 Year 1 Year 2Explanation / Answer
Depreciation Expense for
Book Value at the end of
Method of Depreciation
Year 1
Year 2
Year 1
Year 2
Straight Line
$18,600
$18,600
$80,400
$61,800
Units of production
$24,800
$27,900
$74,200
$46,300
Double Declining Balance
$39,600
$ 23,760
$59,400
$ 35,640
Straight Line Method
Depreciation = [ Cost – Residual Value ] / Useful Life
Depreciation
YEAR 1 = [$99,000 – 6,000] / 5 Years = $18,600
YEAR 2 = [$99,000 – 6,000] / 5 Years = $18,600
Book Value at the end of
YEAR – 1 = $99,000 – 18,600 = $80,400
YEAR – 2 = $80,400 – 18,600 = $61,800
Units of production Method
Depreciation
YEAR - 1= [$99,000 – 6,000] x [53,600/201,000] = $24,800
YEAR - 2= [$99,000 – 6,000] x [60,300/201,000] = $27,900
Book Value at the end of
YEAR – 1 = $99,000 – 24,800 = $74,200
YEAR – 2 = $4,200 – 27,900 = $46,300
Double Declining Balance
Depreciation under Double Declining Balance = Beginning Balance x 2 x Straight Line Depreciation Rate
*Straight Line Depreciation Rate = 1 / Useful Life = 1 / 5 = 0.20
Depreciation
YEAR - 1= $99,000 x 2 x 0.20 = $39,600
YEAR - 2= [$99,000 – 39,600] x 2 x 0.20 = $ 23,760
Book Value at the end of
YEAR – 1 = $99,000 – 39,600 = $59,400
YEAR – 2 = $59,400 – 23,760 = $ 35,640
Depreciation Expense for
Book Value at the end of
Method of Depreciation
Year 1
Year 2
Year 1
Year 2
Straight Line
$18,600
$18,600
$80,400
$61,800
Units of production
$24,800
$27,900
$74,200
$46,300
Double Declining Balance
$39,600
$ 23,760
$59,400
$ 35,640
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