Question
In: Accounting
Paper Printing Company purchased a copy machine for $ 65 comma 000$65,000 on January 1, 2010....
Paper Printing Company purchased a copy machine for
$ 65 comma 000$65,000
on January 1, 2010. The copy machine had an estimated useful life of five years or
1 comma 000 comma 0001,000,000
copies. Paper Printing estimated the copy machine's salvage value to be
$ 5 comma 000$5,000.
The company made
250 comma 000250,000
copies in 2010 and
190 comma 000190,000
copies in 2011.Requirements
LOADING...
1. Calculate the depreciation expense for each year using the straight line method.
|
- |
= |
/ |
= |
Depreciation expense |
|||||
|
- |
= |
/ |
= |
Now we can determine the depreciation per unit. (Round to two decimal places.)
|
/ |
= |
Cost per copy |
||||
|
/ |
= |
Now that the cost per unit has been established we can now depreciate the copy machine based on the number of copies produced.
|
Year |
x |
= |
Depreciation expense |
|||
|
2010 |
x |
= |
||||
|
2011 |
x |
= |
2. Which method portrays the actual use of this asset more accurately? Explain your answer.
When using straight-line depreciation the depreciation expense
▼
is higher at the end of life of the asset
is lower at the end of the life of the asset
remains the same every year
. Straight-line depreciation assumes that the asset will be used
▼
equally
less
more
every year. Activity depreciation is also known as
▼
straight line
units of production
double declining balance
. The activity method depends on the
▼
actual
estimated
number of units produced.
Solutions
Expert Solution
| Depreciation expenses using the SLM method | ||||||
| Annual depreciation(SLM Method) | ||||||
| Cost | Salvage value | expected life(in year) | Depreciation | |||
| $65000 | $5000 | 5 | 65000-5000/5years | |||
| $12000 | ||||||
| Depreciation = cost - salvage value/ expected life | ||||||
| Depreciation cost per unit = Depreciable amount / total units | ||||||
| = $ 60000/$1000000 | ||||||
| 0.06 | ||||||
| therefore the cost per unit is $ 0.060 | ||||||
| Depreciation exp using the activity method | ||||||
| Annual Depreciation(activity method) | ||||||
| year | no of copies made(1) | depreciation per unit(2) | annual depreciation(1*2) | |||
| 2010 | $ 2,50,000.00 | $ 0.06 | $ 15,000.00 | |||
| 2011 | $ 1,90,000.00 | $ 0.06 | $ 11,400.00 | |||
| Activity method records the assets actual use more accurately than the straight line method | ||||||
| activity method track the assets use more comprehensive than the straight line method | ||||||
| therefore it is better method | ||||||
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