value: 0.52 points E9-6 Computing Depreciation under Alternative Methods [LO 9-3
ID: 2564784 • Letter: V
Question
value: 0.52 points E9-6 Computing Depreciation under Alternative Methods [LO 9-3] Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $22,000. The estimated useful life was five years and the residual value was $2,000. 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 1. Complete a depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.) a. Straight-line. Income Statement Depreciation Expense Balance Sheet umulated Book Value Acc De Year Cost Depreciat At acquisition b. Units-of-production. ncome Statement Balance SheetExplanation / Answer
A. Straight Line Method
Income Statement
Balance Sheet
Year
Depreciation Expense
Cost
Accumulated Depreciation
Book Value
At Acquisition
1
4000
22000
4000
18000
2
4000
22000
8000
14000
3
4000
22000
12000
10000
4
4000
22000
16000
6000
5
4000
22000
20000
2000
Depreciation = (22000 -2000)/5 = 4000
B. Units of Production Method
Income Statement
Balance Sheet
Year
Depreciation Expense
Cost
Accumulated Depreciation
Book Value
At Acquisition
1
4000
22000
4000
18000
2
6000
22000
10000
12000
3
4000
22000
14000
8000
4
4000
22000
18000
4000
5
2000
22000
20000
2000
Workings
Year
Units
Depreciation
Calculation
1
2000
4000
(22000 - 2000)*2000/10000
2
3000
6000
(22000 - 2000)*3000/10000
3
2000
4000
(22000 - 2000)*2000/10000
4
2000
4000
(22000 - 2000)*2000/10000
5
1000
2000
(22000 - 2000)*1000/10000
Total
10000
C. Double declining Balance Method
Income Statement
Balance Sheet
Year
Depreciation Expense
Cost
Accumulated Depreciation
Book Value
At Acquisition
1
8800
22000
8800
13200
2
5280
22000
14080
7920
3
3168
22000
17248
4752
4
1901
22000
19149
2851
5
851
22000
20000
2000
Workings
Computation of Depreciation under Double declining Method
(A)
(B)
(C)
(D) = (B)*(C)
(E)
(F) = (B) - (D)
Year
Book Value
Year Start
Depreciation Percent
Depreciation Expense
Accumulated Depreciation
Book Value
Year End
1
22000
40%
8800
8800
13200
2
13200
40%
5280
14080
7920
3
7920
40%
3168
17248
4752
4
4752
40%
1901
19149
2851
5
2851
29.85%
851
20000
2000
Rate of Depreciation Under Straight Line Method is 20% and Rate of Depreciation under Double declining Method is 40%
A. Straight Line Method
Income Statement
Balance Sheet
Year
Depreciation Expense
Cost
Accumulated Depreciation
Book Value
At Acquisition
1
4000
22000
4000
18000
2
4000
22000
8000
14000
3
4000
22000
12000
10000
4
4000
22000
16000
6000
5
4000
22000
20000
2000
Depreciation = (22000 -2000)/5 = 4000
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