Sneetch Ioc. purchased a star making machine on January 1, 2014 The cost of the

Question

Sneetch Ioc. purchased a star making machine on January 1, 2014 The cost of the machine was $17,000 Us estimated residual value was $2,000 at the end ol an estimated 10 year life The company experts to produce a total ol 20.000 units a. Calculate depreciation expense fot 2014 and 2015 using the stiaight-ine method b. Calculate depredation expense for 2014 and 2015 using the double-decining balance method c. Calculate the depredation expense for 2014 and 2015 using the units-of-production method The company produced 1.500 units in 2014 and 2.200 unHs in 2015

Explanation / Answer

A)

Under Straight line method

Dericiation = (Cost of machine - salvage value) / Useful life

2014 = ($17,000 -2,000 ) / 10 = $1500

B)

Under double declining method

Double declining rate = ($17,000 -2,000 ) / 10 = $1500/15000 *100 *2 = 20%

2014 = $15,000*20% = $3,000

2015 = $15,000-3000 = $12,000*20% = $2,400

C)

Depreciation under units of production =(Cost Salvage Value) * Number of units produced / life in number of units

2014 = ($17,000 -2,000 ) *1,500 / 20,000 = $1,125

2015 ($17,000 -2,000 ) *2,200/20,000 = $1,650

2014 2015 Depriciation Exp $1500 $1500

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