Question

Duluth Ranch, Inc. purchased a machine on January 1, 2018. The cost of the machine was $30,500. Its estimated residual value was $9,500 at the end of an estimated 5-year life. The company expects to produce a total of 10,000 units. The company produced 1,150 units in 2018 and 1,600 units in 2019.


Required:

a. Calculate depreciation expense for 2018 and 2019 using the straight-line method.

b. Calculate the depreciation expense for 2018 and 2019 using the units-of-production method.

c. Calculate depreciation expense for 2018 through 2022 using the double-declining balance method.

Answer 1

a.	Straight Line method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value
		=	($30,500 - $9,500) / 5 years
		=	$              4,200
			2018	2019
	Depreciation expense	=	$              4,200	$              4,200
b.	Units of production method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value in units
		=	($30,500 - $9,500) / 10,000 units
		=	$                2.10
			2018	2019
	Depreciation expense	=	$              2,415	$              3,360
			(1,150 X $2.10)	(1,600 X $2.10)
c.	Double - declining balance method:-
	Double declining rate	=	(100%/ 5 years) X 2
		=	40%
			2018	2019	2020	2021	2022
	Depreciation expense	=	$           12,200	$              7,320	$             1,480	0	0
					Depreciation expense	Remaining Value
	2018	=	$30,500 X 40%	=	$           12,200	$ 18,300
	2019	=	$18,300 X 40%	=	$             7,320	$ 10,980
	2020	=	$10,980 - $9,500 (salvage value)	=	$             1,480	$    9,500
	2021	=		=	0	0
	2022	=		=	0	0