Problems (7 problems, totaling 75 points) Problem 1A-Depreciation (15 points) Sn

Question

Problems (7 problems, totaling 75 points) Problem 1A-Depreciation (15 points) Snyder Inc. purchased a machine costing $96,000. The residual value is $6,000 Estimate useful life is 8 years. Estimated total units of production is 30,000 units Production for years 1 to 3 are 1,000 units, 3,500 units and 5,000 units. Compute the depreciation schedule under the following methods: straight-line, units-of production, and double-declining balance method, for 3 years Straight-line for 3 yeans Yr. Calculation Depreciation Accumulated xpenseDepreciation Book Value Units of production for 3 years Depreciation Accumulated Expense Depreciation Book Value Yr Calculation Double-Declining Balance for 3 years Depreciation Accumulated Yr Calculation Expense Deprecn Book Value A1 Exam 3A S18, Page S

Explanation / Answer

1 Straight line depreciation = (Cost of asset - salvage value )/ Life of the asset Depreciation expense = (96000-6000) /8 11250 Accumulated depreciation Depreciation expense Book value Year 0 0 96000 1 11250*12/12 11,250 11,250 84,750 2 11250*12/12 11,250 22,500 73,500 3 11250*12/12 11,250 33,750 62,250 2 Double declining method Depreciation rate = [(cost of asset / life of asset ) / cost of asset ] *2 Depreciation rate = [96,000/8)/96,000] *2 Depreciation rate = 25% Depreciation = written down value * depreciation rate Accumulated depreciation Depreciation expense Book value Year 0 96000 1 Depreciation = 96,000 * 25%   24000 24,000 72,000 2 Depreciation = 72000*25% 18,000 42,000 54,000 3 Depreciation = 54000*25% 13500 55,500 40,500 3 Units of production method Depreciation per machine hour = (Cost of asset - salvage value )/ total machine hour Depreciation per machine hour = (96000-6000 )/30000 Depreciation per item 3 Accumulated depreciation Depreciation expense Book value Year 0 96000 1 3*1000 3000 3,000 93,000 2 3*3500 10500 13,500 82,500 3 3*5000 15000 28,500 67,500

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