Question

Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1, 2018:

Purchase price	$	71,000
Delivery cost	$	3,000
Installation charge	$	2,000
Estimated life		5	years
Estimated units		146,000
Salvage estimate	$	3,000

During 2018, the machine produced 42,000 units and during 2019, it produced 44,000 units.

Required

Determine the amount of depreciation expense for 2018 and 2019 using each of the following methods:

2018	2019
a.	Straight-line	not attempted	not attempted
b.	Double-declining-balance	not attempted	not attempted
c.	Units of production	not attempted

[The following information applies to the questions displayed below.]

Three different companies each purchased trucks on January 1, 2018, for $72,000. Each truck was expected to last four years or 200,000 miles. Salvage value was estimated to be $7,000. All three trucks were driven 67,000 miles in 2018, 42,000 miles in 2019, 40,000 miles in 2020, and 62,000 miles in 2021. Each of the three companies earned $61,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double-declining-balance depreciation, and company C uses units-of-production depreciation.

Answer each of the following questions. Ignore the effects of income taxes.

1. a-1. Calculate the net income for 2018? (Round "Per Unit Cost" to 3 decimal places.)

Net Income
Company A	not attempted
Company B	not attempted
Company C

a-2. Which company will report the highest amount of net income for 2018?

• Company A

• Company B

• Company C

• All of the choices

Answer 1

Step 1:- Find the cost of the machine to be capitalized:-

Cost of the machine = Purchase price + Delivery cost + Installation cost

Cost of the machine = $71,000 + $3,000 + $2,000

Cost of the machine = $76,000

Requirement A:-

Depreciation under straight line method = (Cost of the asset - Salvage value)/Estimated life of the asset

=($76,000 - $3,000)/5 years

=$73,000/5 years

=$14,600

Straight line method depreciation:-

2018 - $14,600

2019 - $14,600

Requirement B:-

Double Declining balance method:-

Yearly depreciation under double declining balance method:-

=100/Estimated life of the asset

=100/5 years

=20% * 2

=40%

Depreciation expense for 2018 = $76,000 * 40% = $30,400

Depreciation expense for 2019 = ($76,000 - $30,400) * 40% = $18,240

Double declining balance method depreciation:-

2018 - $30,400

2019 - $18,240

Requirement C:-

Units of production method = (Cost of the asset - Salvage value)/Estimated units

=($76,000 - $3,000)/146,000

=$73,000/146,000

=$0.5 per unit

2018 Depreciation expense = 42,000 units * $0.5 per unit = $21,000

2019 Depreciation expense = 44,000 units *$0.5 per unit = $22,000

Units of production method depreciation:-

2018 - $21,000

2019 - $22,000

Kindly post the other question separately so that we can answer them as well. All the best and please let me know if you have any questions via comments :)