UwotUmyhm.tpx Better Applications Corporation bought a machine at the beginning

Question

UwotUmyhm.tpx Better Applications Corporation bought a machine at the beginning of the year at a cost of $24,000 The estimated useful life was five years and the residual value was $3,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production for year 1, 2.000 units, year 2 3,000 units, year 3, 2,000 units, year 4, 2,000 units, and year 5, 1,000 units Required: Complete a depreciation schedule for each of the alternative methods (Do not round intermediate calculations.) 1. a. Straight-line. Income Statement Balance Sheet Accumulated Depreciation Expen Year Cost Book Value At acquisition b. Units-of-production Balance Sheet eciation Book Cost D Year At acquisition c. Double-declining-balance

Explanation / Answer

a. Straight line Caculations: Cost           24,000 Less: residual value             3,000 Depreciable value           21,000 Estimated useful life 5 years Deprecation per year             4,200 Income statement Balance Sheet Year Depreciation Expense Cost Accumulated depreciation Book Value At acquisition 24000 1                                                 4,200           24,000 4200           19,800 2                                                 4,200           24,000 8400           15,600 3                                                 4,200           24,000 12600           11,400 4                                                 4,200           24,000 16800              7,200 5                                                 4,200           24,000 21000              3,000 b. Units of production: Income statement Balance Sheet Year Depreciation Expense Cost Accumulated depreciation Book Value At acquisition 24000 1 =21000/10000*2000 = 4200           24,000 4200           19,800 2 =21000/10000*3000 = 6300           24,000 10500           13,500 3 =21000/10000*2000 = 4200           24,000 14700              9,300 4 =21000/10000*2000 = 4200           24,000 18900              5,100 5 =21000/10000*1000 = 2100           24,000 21000              3,000 c. Double declining: Cost           24,000 Less: residual value             3,000 Depreciable value           21,000 Estimated useful life 5 years Deprecation per year             8,400 Income statement Balance Sheet Year Depreciation Expense Cost Accumulated depreciation Book Value At acquisition 1                                                 8,400           24,000 8400           15,600 2                                                 8,400           24,000 16800              7,200 3                                                 4,200           24,000 21000              3,000 4                                                         -             24,000 21000              3,000 5                                                         -             24,000 21000              3,000 2.a. Straight line method as it has the lowest depreciation in year 2 resulting in highest net income in year 2. 2.b. No. Depreciation method does not affect the efficient use of machinery. It is just a method of accounting. Please hit the like button if the answer helped you else leave a comment for further clarification. Thank you! All the best!

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