Quiz Chapter 10 Name(s) A machine costing $58,600 was purchased May 31t 2008 and

Question

Quiz Chapter 10 Name(s) A machine costing $58,600 was purchased May 31t 2008 and immediately put to use. Transportation costs for the machine were $400, installation was $500 and taxes were S500. The machine is expected to have a 4 yr life and a salvage value of $12,000. Calculate depreciation expense for all 4 years under the straight line method, double declining method and units of production. (list depreciation expense separately for each year under each method) Units of production are as follows 2008 6,000 units 2009-8,000 units 2010-5,000 units 2011-3,000 units 2012-2,000 units

Explanation / Answer

a. Straight line Caculations: Cost     58,600 Add: Transportation cost           400 Add: Installation cost           500 Add: Taxes           500 Landed cost of machine     60,000 Less: residual value     12,000 Depreciable value     48,000 Estimated useful life 4 years Deprecation per year     12,000 Income statement Balance Sheet Year Depreciation Expense Cost Accumulated depreciation Book Value At acquisition          60,000 1                                               12,000     60,000               12,000          48,000 2                                               12,000     60,000               24,000          36,000 3                                               12,000     60,000               36,000          24,000 4                                               12,000     60,000               48,000          12,000 b. Units of production: Income statement Balance Sheet Year Depreciation Expense Cost Accumulated depreciation Book Value At acquisition 60000 1 =48000/22000*6000=13091     60,000 13091          46,909 2 =48000/22000*8000=17455     60,000 30545          29,455 3 =48000/22000*5000=10909     60,000 41455          18,545 4 =48000/22000*3000=6545     60,000 48000          12,000 c. Double declining: Cost     60,000 Less: residual value     12,000 Depreciable value     48,000 Estimated useful life 4 years Deprecation per year     24,000 Income statement Balance Sheet Year Depreciation Expense Cost Accumulated depreciation Book Value At acquisition 1                                               24,000     60,000 24000          36,000 2                                               24,000     60,000 48000          12,000 3                                                          -       60,000 48000          12,000 4                                                          -       60,000 48000          12,000 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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