Cheetah Copy purchased a new copy machine. The new machine cost $106,000 includi

Question

Cheetah Copy purchased a new copy machine. The new machine cost $106,000 including installation. The company estimates the equipment will have a residual value of $26,500. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows:

1. Prepare a depreciation schedule for four years using the straight-line method. (Do not round your intermediate calculations.)

2. Prepare a depreciation schedule for four years using the double-declining-balance method. (Hint: The asset will be depreciated in only two years.) (Do not round your intermediate calculations.)

3. Prepare a depreciation schedule for four years using the activity-based method. (Round your "Depreciation Rate" to 3 decimal places and use this amount in all subsequent calculations.)

1. Prepare a depreciation schedule for four years using the straight-line method. (Do not round your intermediate calculations.)

2. Prepare a depreciation schedule for four years using the double-declining-balance method. (Hint: The asset will be depreciated in only two years.) (Do not round your intermediate calculations.)

3. Prepare a depreciation schedule for four years using the activity-based method. (Round your "Depreciation Rate" to 3 decimal places and use this amount in all subsequent calculations.)

Explanation / Answer

Straight line method of depreciation (106,000-26500)/4 19875 1) Straight line Accumul book year beginning dep dep value 1 106,000 19,875 19,875 86,125 2 86,125 19,875 39,750 66,250 3 66,250 19,875 59,625 46,375 4 46,375 19,875 79,500 26,500 2) DDB 1/4*2= 50% Accumul book year beginning dep dep value 1 106,000 53,000 53,000 53,000 2 53,000 26,500 79,500 26,500 3 26,500 0 0 26,500 4 26,500 0 0 26,500 3) Activity based (106000-26500)/8000 9.938 Accumul book year beginning dep dep value 1 106,000 27,826 27,826 78,174 2 78,174 19,876 47,702 58,298 3 26,500 19,876 67,578 38,422 4 38,422 11,922 79,500 26,500

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