Can an expert check my work please: Johnson Technology, Inc. purchased factory e
ID: 2409117 • Letter: C
Question
Can an expert check my work please:
Johnson Technology, Inc. purchased factory equipment on January 1, 2016 for $60,000. The equipment has an estimated life of five years and an estimated residual value of $6,000. The company has also estimated that the equipment will produce 40,000 units over its useful life.
What is the depreciation and book value at the end of year 1 using the straight-line depreciation method?
Depreciation =(Acquisition Cost-Residual Value)/Life
=($60,000-$6000)/5=$10,800
= ($60,00-$10,800=$49,200
What is the depreciation and book value at the end of year 1 using the double-declining balance method?
Year 1Depreciation using DDB= 1/5 x2 x $60,000=$12,000
Depreciation=Beginning Book Value x Rate
=$60,000 x40%
=$24,000
=($60,000-$24,000)x 40%
= $14,400
If 10,000 units are produced in year 1, what is the depreciation and book value at the end of year 1 using the units-of-production method?
Depreciation per unit=(Acquisition Cost-Residual Value)/Life in Units
=($60,000-$6000)/40,000
= $1.35
Annual Depreciation =Depreciation per Unit x Units Produced in 2016
=$1.35 per unit x 10,000 units
=$13,500
Explanation / Answer
Your working for depreciation and book value at end of year 1 under straight line method and units of production method are correct.
Depreciation using double declining method is correct. But Book value at end of year 1 is 36,000
=Purchase cost - depreciation for year 1
=60000 - 24000 = $36,000
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