Question

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

Purchase price	$	91,000
Delivery cost	$	5,000
Installation charge	$	3,000
Estimated life		5	years
Estimated units		160,000
Salvage estimate	$	3,000

During Year 1, the machine produced 56,000 units, and during Year 2 it produced 58,000 units.

Required
a. Determine the amount of depreciation expense for Year 1 and Year 2 using straight-line method.
b. Determine the amount of depreciation expense for Year 1 and Year 2 using double-declining-balance method.
c. Determine the amount of depreciation expense for Year 1 and Year 2 using units of production method.
d. Determine the amount of depreciation expense for Year 1 and Year 2 using MACRS, assuming that the machine is classified as seven-year property. (Round your answers to the nearest dollar amount.)

MACRS table:

Year	5-Year property,%			7-Year property,%
1		20.00			14.29
2		32.00			24.49
3		19.20			17.49
4		11.52			12.49
5		11.52			8.93
6		5.76			8.92
7					8.93
8					4.46

	Year 1 Year 2 a. Depreciation expense b. Depreciation expense c. Depreciation expense d. Depreciation expense

Answer 1

a.)	Total Cost	99,000	=91000+5000+3000
	Salvage estimate	3,000
	Life	5 Years
		Year 1	Year 2
	Depreciation Expense$	19,200	19,200
		=(99000-3000)/5	=(99000-3000)/5
b.)	Total Cost	99,000	=91000+5000+3000
	Depreciation rate	40%	=1/5*2
		Year 1	Year 2
	Depreciation Expense $	39,600	23,760
		=99000*40%	=(99000-39600)*40%
c.)	Total Cost	99,000	=91000+5000+3000
	Salvage estimate	3,000
	Depreciable Amount	96,000	=99000-3000
	Depreciation rate per unit	$ 0.60	=96000/160000
		Year 1	Year 2
	Depreciation Expense $	33,600	34,800
		=56000*0.6	=58000*0.6
d.)		Year 1	Year 2
	Depreciation Expense $	14,147	24,245
		=99000*14.29%	=99000*24.49%