1/ A company purchased a weaving machine for $341,560. The machine has a useful

Question

1/ A company purchased a weaving machine for $341,560. The machine has a useful life of 8 years and a residual value of $19,000. It is estimated that the machine could produce 768,000 bolts of woven fabric over its useful life. In the first year, 114,000 bolts were produced. In the second year, production increased to 118,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

Multiple Choice

$50,700.

$97,440.

$49,560.

$47,880.

$52,479.

2/ Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $136,000. The asset is expected to have a salvage value of $15,900 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

Multiple Choice

$73,440

$39,204

$29,376

$26,136

$122,400

Explanation / Answer

1. Depreciation expenses for second year = {($341,560 - $19,000)/768,000 bolts} x 118,000 units
  = $49,560

2. Calculation of the asset's book value on December 31, Year 2:

Straight-Line Depreciation Percent = 100% / 5 years = 20% / year.
Depreciation Rate = 2 x 20% = 40% / year
Depreciation year 1 = $136,000 x 40% x 3 /12 = $13,600
Book value at year 1 = $136,000 - $13,600 = $122,400

Depreciation year 2 = $122,400 x 40% = $48,960
Book value at year 2 = $122,400 - $48,960 = $73,440

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