Accounting GBA 5205 Problem 6-23 Calculating depreciation expense using three di

Question

Accounting GBA 5205

Problem 6-23 Calculating depreciation expense using three different methods Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1,2018: Purchase price Delivery cost Installation charge Estimated life Estimated units Salvage estimate $70,000 $ 3,000 $1,000 5 years 140,000 $4,000 During 2018, the machine produced 36,000 units and during 2019, it produced 38,000 units. Required Determine the amount of depreciation expense for 2018 and 2019 using each of the following methods: a. Straight-line. b. Double-declining-balance. c. Units of production.

Explanation / Answer

a Straightline depreciation=(cost of depreciable asset-Salvage value)/Estimated life Purchasev price $70,000 Delivery cost $3,000 Installation charge $1,000 Cost of depreciable assets $74,000 Salvage Value $4,000 Straight line depreciation 2018 $14,000 (74000-4000)/5 Straight line depreciation 2019 $14,000 (74000-4000)/5 b Double Declining balance Depreciation Percentage depreciation under straight line method 20% (1/5)*100 Percentage depreciation under double declining balance method 40% (2*20) A B=A*0.4 C=A-B Year Net Book Value Double declining Net Book value Beginning of year Balance Depreciation End of year 2018 1 $74,000 $29,600 $44,400 2019 2 $44,400 $17,760 $26,640 2020 3 $26,640 $10,656 $15,984 2021 4 $15,984 $6,394 $9,590 2022 5 $9,590 $3,836 $5,754 Year Depreciation 2018 $29,600 2019 $17,760 2020 $10,656 2021 $6,394 2022 $3,836 c. UNITS OF PRODUCTION METHOD Estimated Units 140000 Depreciation per unit $             0.5000 (74000-4000)/140000 Depreciation in 2018 $             18,000 (36000*0.50) Depreciation in 2019 $             19,000 (38000*0.50)

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