Question

Can I see the solution for Excel applications for accounting principles P9 ticklers(optional) DEPECT?

Answer 1

PROBLEM DATA

Dunedin Drilling Company recently acquired a new machine at a cost of $350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of $30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4.

REQUIREMENT

Dunedin buys equipment frequently and wants to print a depreciation schedule for each asset's life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.

Step-by-step solution:

• Step 1 of 3

  Straight – Line Depreciation:

  Depreciation under this method is calculated by dividing cost less salvage value by useful life (number of years). Under straight-line method of depreciation, same percentage of asset cost is allocated for the accounting year.

  

  Units – of – Production Method:

  Activity method of depreciation is also known as units-of-production method which assumes that depreciation is calculated based on use of asset or productivity instead of passage of time. Depreciation is calculated based on actual number of hours it worked or number of units it produces. But depreciation based on the number of machine hours.

  

  Double-Declining Balance method :

  A depreciation method which is dependent on a fixed percentage of value reduction of assets over its service life.

  This method uses a depreciation rate which indicates some multiple of straight-line method.

  

• Working note:

  Straight-Line Method:

  

  Hence, depreciation for each year is $80,000.

  Units – of – Production Method:

  Year 1:

  

• Step 3 of 3Year 2:

  

  Year 3:

  

  Year 4:

  

  Double – Declining Balance Method:

  Year 1:

  

  Year 2:

  

  Year 3:

  

  Year 4:

• Depreciation for 4th year =($350000-$175000-$87500-$43750)x1/4 yrs x2 =21875.