Computing Depreciation under Alternative Methods At the beginning of the year, P

Question

Computing Depreciation under Alternative Methods At the beginning of the year, Palermo Brothers, Inc., purchased a new plastic water bottle making machine at a cost of $45,000. The estimated residual value was $5,000. Assume that the estimated useful life was four years and the estimated productive life of the machine was 400,000 units. Actual annual production was as follows E8-11 LO8-3 Year Units 2 3 4 120,000 90,000 110,000 80,000 Required 1. Complete a separate depreciation schedule for each of the alternative methods. Round your answers to the nearest dollar a. Straight-line b. Units-of-production c. Double-declining-balance. Method: Depreciation Expense Accumulated Depreciation Net Book Value Year At acquisition 2 Computation etc

Explanation / Answer

STRAIGHT LINE METHOD

UNITS OF PRODUCTION METHOD

DOUBLE DECLINING BALANCE METHOD

(*) Depreciation cannot be made below the salvage value. Depreciation in the year 4 has to be limited to 625.  

Year Computation Depreciation expense Accumulated Depreciatuion Net book value At acquision (cost-residual value)/useful life 45,000 1 (45,000-5,000)/4 10,000 10,000 35,000 2 (45,000-5,000)/4 10,000 20,000 25,000 3 (45,000-5,000)/4 10,000 30,000 15,000 4 (45,000-5,000)/4 10,000 40,000 5,000

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