Question

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Exact Photo Service purchased a new color printer at the beginning of Year 1 for $38,800. The printer is expected to have a four-year useful life and a $3,400 salvage value. The expected print production is estimated at $1,764,600 pages. Actual print production for the four years was as follows:

Year 1		547,600
Year 2		479,300
Year 3		379,100
Year 4		387,600
Total		1,793,600

The printer was sold at the end of Year 4 for $3,650.

Required
a. Compute the depreciation expense for each of the four years, using double-declining-balance depreciation. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

b. Compute the depreciation expense for each of the four years, using units-of-production depreciation. (Round cost per unit to three decimal places and final answers to the nearest whole dollar amount.)

c. Calculate the amount of gain or loss from the sale of the asset under each of the depreciation methods.
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Answer 1

Requirement 1

Double declining Method
A	Cost	$      38,800.00
B	Residual Value	$         3,400.00
C=A - B	Depreciable base	$      35,400.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$         8,850.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$    38,800.00	50.00%	$ 19,400.00	$        19,400.00	$   19,400.00
2	$    19,400.00	50.00%	$    9,700.00	$          9,700.00	$   29,100.00
3	$       9,700.00	50.00%	$    4,850.00	$          4,850.00	$   33,950.00
4	$       4,850.00	50.00%	$    1,450.00	$          3,400.00	$   35,400.00

Requirement 2

Units of Production method
A	Cost	$     38,800.00
B	Residual Value	$       3,400.00
C=A - B	Depreciable base	$     35,400.00
D	Usage in units(in Prints Production)	1764600
E	Depreciation per Print'	$               0.02

Year	Book Value	Usage	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$    38,800.00	547600	$ 10,985.52	$        27,814.48	$   10,985.52
2	$    27,814.48	479300	$    9,615.33	$        18,199.15	$   20,600.85
3	$    18,199.15	379100	$    7,605.20	$        10,593.95	$   28,206.05
4	$    10,593.95	358600	$    7,193.95	$          3,400.00	$   35,400.00

Actual production is more than estimated production. This does not mean high depreciation will be charged. Depreciation will be charged only upto Depreciation base (Cost-residual value).

Requirement 3

	Double-declining-balance depreciation	Units of Production method
Cost	$      38,800.00	$      38,800.00
Total Accumulated deprecation	$      35,400.00	$      35,400.00
Book value	$         3,400.00	$         3,400.00
Sale proceeds	$         3,650.00	$         3,650.00
Profit (loss) on sale	$            250.00	$            250.00