In: Accounting
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.
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.....