Question

In: Accounting

On January 1, Year 1, Dunn Brothers, Inc., purchased a new smartphone case making machine at...

On January 1, Year 1, Dunn Brothers, Inc., purchased a new smartphone case making machine at a cost of $44,000. The estimated residual value was $5,000. Assume that the estimated useful life was four years and the estimated productive life of the machine was 390,000 units. Actual annual production was as follows: Year Units 1 117,000 2 85,800 3 107,250 4 79,950 Required:

a. Calculate depreciation expense under the Straight-line method for Years 1 to 4.

b. Calculate depreciation expense under the Units-of-production method for Years 1 to 4.

c. Complete a depreciation schedule under the Double-declining-balance method.

Solutions

Expert Solution

Hello,

Basing on the above information,the following answer was given:

A.Calculation of depreciation expense under Straight Line Depreciation Method:

*Cost of the Asset = $44000

*Estimated residual Value = $5000

*Machine Useful Life = 4Years

*Calculation of depreciation for each Year = (Cost of the Asset - Estimated residual Value) / Machine Useful Life

                                                                  = ($44000-$5000) / 4Years

                                                                  = $39000 / 4 Years

                                                                  = $9750.

***Depreciation Expense for Year 1 = $9750

                                            Year 2 = $9750

                                            Year 3 = $9750

                                           Year 4 = $9750

B.Calculation of depreciation expense under the Units-of-production method.

*Cost of the Asset = $44000

*Machine Useful Life = 4Years

*Producuctive life of the Machine = 390000Units

*year 1 Production = 117000Units

*year 2 Production = 85800Units

*year 3 Production = 107250Units

*year 4 Production = 79950Units

**Depreciation for Year 1 = (Cost of the Asset / Producuctive life of the Machine) * year 1 Production

                                        = ($44000/390000Units) * 117000Units

                                        = $13200.

**Depreciation for Year 2 = (Cost of the Asset / Producuctive life of the Machine) * year 2 Production

                                        = ($44000/390000Units) * 85800Units

                                        = $9680.

**Depreciation for Year 3 = (Cost of the Asset / Producuctive life of the Machine) * year 3 Production

                                        = ($44000/390000Units) * 107250Units

                                        = $12100.

**Depreciation for Year 4 = (Cost of the Asset / Producuctive life of the Machine) * year 4 Production

                                        = ($44000/390000Units) * 79950Units

                                        = $9020.

C.Calculation of depreciation expense under the Double-declining-balance method.

*Cost of the Asset = $44000

*Machine Useful Life = 4Years

*Depreciation Rate = 1/Useful Life *100

                              = 1/4 *100

                             = 25%

** Double-declining balance formula = 2 * Cost of the asset * Depreciation rate

***Depreciation for the year 1 = 2 * $44000 * 25%

                                               = $22000.

***Depreciation for the year 2 = 2 * $22000 * 25%

                                               = $11000.

***Depreciation for the year 3 = 2 * $11000 * 25%

                                               = $5500.

***Depreciation for the year 4 = 2 * $5500 * 25%

                                               = $2750.

Thank You.....


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