14 value: .00 points E9-7 Computing Depreciation under Alternative Methods [LO 9

Question

14 value: .00 points E9-7 Computing Depreciation under Alternative Methods [LO 9-3] Tails Corporation purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX, at a cost of $21,600. The equipment has an estimated residual value of $1,200. The equipment is expected to process 256,000 payments over its three-year useful life. Per year, expected payment transactions are 61,440, year 1; 140,800, year 2; and 53,760, year 3. Required Complete a depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.) . Straight-line. Income Statement Depreciation Expense Balance Sheet Accumulated Book Value Depreciation Year Cost At acquisition 2

Explanation / Answer

CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR MACHINE Purchase Cost of Machine $                21,600.00 Less: Salvage Value $                  1,200.00 Net Value for Depreciation $                20,400.00 Usefule life of the Assets 3 years Depreciation per year = Value for Depreciation / 3 years =                      6,800.00 Total Depreciation Per year = $                  6,800.00 DEPRECIATION SCHEDULE - Straight Line Income Statement Balance Sheet Year   Depreciation Expenses Cost Accumulation Depreciation Book Value At Acquisition $              21,600.00 $                     21,600.00 1 $                  6,800.00 $          6,800.00 $                     14,800.00 2 $                  6,800.00 $        13,600.00 $                        8,000.00 3 $                  6,800.00 $        20,400.00 $                        1,200.00 CALCULATION OF THE DEPRECIATION AS PER UNITS OF PRODUCTION Purchase Cost of Machine $                21,600.00 Less: Salvage Value $                  1,200.00 Net Value for Depreciation $                20,400.00 Expected to production in Units                2,56,000.00 Transaction Depreciation per Hours =                          0.0797 Per Transaction ($ 84,000 / 525,000 Units) Depreciation for Year 1 (61,440 Units X 0.0797) $                  4,896.00 Depreciation for Year 1 (140,800 Units X 0.0797) $                11,220.00 Depreciation for Year 1 (53760 Units X 0.0797) $                  4,284.00 DEPRECIATION SCHEDULE - Unit of production Income Statement Balance Sheet Year   Depreciation Expenses Cost Accumulation Depreciation Book Value At Acquisition $              21,600.00 $                     21,600.00 1 $                  4,896.00 $          4,896.00 $                     16,704.00 2 $                11,220.00 $        16,116.00 $                        5,484.00 3 $                  4,284.00 $        20,400.00 $                        1,200.00 CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD Purchase Cost of Machine $                21,600.00 Useful Life = 3 years Depreciation per year = $                  7,200.00 (Purchase price / Useful life) Rate of Depreciation = 0.3333 or 33.33% (Depreication / Purchase price ) Double decline deprection rate = 33% * 2 = 66.667% Purchase Value of the year 1 = $                21,600.00 Depreciation for the year 1 $                14,400.00 Closing balance for the year 1 $                  7,200.00 Opening Balance for the year 2 $                  7,200.00 Depreciation for the year 2 $                  4,800.00 Closing balance for the year 2                      2,400.00 Opening Balance for the year 3 $                  2,400.00 Depreciation for the year 3 $                  1,600.00 Closing balance for the year 3                          800.00 DEPRECIATION SCHEDULE - DOUBLE DECLINE Income Statement Balance Sheet Year   Depreciation Expenses Cost Accumulation Depreciation Book Value At Acquisition $              21,600.00 $                     21,600.00 1 $                14,400.00 $        14,400.00 $                        7,200.00 2 $                  4,800.00 $        19,200.00 $                        2,400.00 3 $                  1,600.00 $        20,800.00 $                           800.00

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