Intermediate Accounting Writing Assignment The Koplic Manufacturing Company purc

Question

Intermediate Accounting
Writing Assignment

The Koplic Manufacturing Company purchases laser equipment for $250,000.
- The estimated service life for the machine is 5 years and the anticipated residual value is $45,000.
- The machine is disposed of after 5 years.

The unit produced by the machine are:

Assess the depreciation of the equipment using units-of-production method and the double-declining balance method.
- Compare and contrast the depreciation produced by the two methods.

I know this is a long one, but help is greatly appreciated. Thank you!

Explanation / Answer

Units of production method :

Depreciation = number of units produced / life in number of units * cost - salvage

I year = 32000 / 102000 * (250000 - 45000) = 64314

II year = 24000 / 102000 * (205000) = 48235

III year = 12000 / 102000 * (205000) = 24118

IV year = 18000 / 102000 * (205000) = 36176

V year = 16000 / 102000 * (205000) = 32157

Double Declining method:

Straight line depreciation percent = 100% / 5 = 20%

Depreciation rate = 2* 20% = 40%

Year Cost Depreciation Accummulated depreciation Book value

1 250000 100000 100000 150000

2 150000 60000 160000 90000   

3 90000 36000 196000 54000

4 54000 9000 205000 45000

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