Question

on Jan 1 of the current year a company purchased and placed in serice a machine with a cost of $240,000. The company estimated the machines useful life to be 4 years or 60,000 units of output with an estimated salvage valus of $60,000. During the current year 12,000 united were produced

prepare the necessary Dec 31 adjusting journal entry to record depreciation for the current year assuming the company uses

1) units of production methid deoreciation

2) double declinin balance method of depreciation

Answer 1

1)

Date

General Journal

Debit

Credit

December 31

Depreciation Expense

$     36,000

Accumulated Depreciation-Machine

$     36,000

(To record depreciation for the year)

Working:

Step-1:Calculation of depreciation expense per unit of production

Depreciation Expense per unit of production

=

(Cost-Salvage Value)/Total Estimated Production

=

(240000-60000)/60000

=

$            3.00

Step-2:Calcuation of Depreciation expense for Year 1

Depreciation Expense

=

Units produced in Year 1 x Unit rate

=

12000

x

$       3.00

=

$       36,000

2)

Date

General Journal

Debit

Credit

December 31

Depreciation Expense

$ 1,20,000

Accumulated Depreciation-Machine

$ 1,20,000

(To record depreciation for the year)

Working:

Straight Line depreciation rate

=

1/4

=

25%

Double declining rate

=

2*25%

=

50%

Depreciation Expense for Year 1

=

Cost x Double declining rate

=

240000

x

50%

=

$       1,20,000