Question

In: Accounting

Best Company acquired a machine on January 1, 2018, that cost $40,000 and had an estimated...

Best Company acquired a machine on January 1, 2018, that cost $40,000 and had an estimated residual value of $4,000. Complete the following schedule (for 2018) using the three methods of depreciation:

  1. straight-line, B.) units-of-production, C.) declining-balance at 150% acceleration rate.

(Round to the nearest dollar).

                                              Income Statement          Balance Sheet

Method              Useful Life               2018 Expense          2018 Accum. Deprec.

SL                       5 yrs                 $__________             $__________

Units Prod.           8,000 units             $__________             $__________

(2018 Actual 2,000 units)

         

200% DB                5 yrs                 $__________              $__________

Solutions

Expert Solution

Depreciation expense is the amount a company's assets are depreciated for single period.

Whereas Accumulated depreciation is the total amount a company depreciates its assets.

Accumulated Depreciation = Depreciation Expense of Asset x Number of years

So, in 1st year Depreciation expenses = Accumalated depreciation.

Solution : --

Cost of Machine acquired on 1Jan 2018 = $40000

Residual value of Machine = $4000

a) Straight Line method

Depreciation Expense = (Fixed Assets's Cost - Residual Value) / useful life

Depreciation = (40000 - 4000) / 5 = $7200

Depreciation expense 2018 = $7200

Accumalated Depreciation 2018 = $7200

b) Units Produced

Total Units produced in life in Machine = 8000units

Units produced in 2018 = 2000units

Depreciation expense = per unit Depreciation x total number of units produced in the year

where, per unit Depreciation = Assets's cost / total units produced by machine in its life

Depreciation = (40000/ 8000) x 2000 = 10000

Depreciation expense 2018 = $10000

Accumalated Depreciation 2018 = $10000

c) Depreciation by Declining balance at 150% acceleration = 150% x Strainght line depreciation percentage x book value of asset

where, straight line percentage = 1/ useful life of asset

= 1/5 = 20%

Depreciation Rate at 150% acceleration = 150% x 20% = 1.5 x 20% == 30%

Depreciation = 40000 x 30% = $12000

Depreciation expense 2018 = $12000

Accumalated Depreciation 2018 = $12000

200 DB Method

Depreciation by Declining balance at 200% acceleration = 200% x Strainght line depreciation percentage x book value of asset

where, straight line percentage = 1/ useful life of asset x 100

= 1/5 x 100 = 20%

Depreciation Rate at 200% acceleration = 200% x 20% = 2 x 20% == 40%

Depreciation = 40000 x 40% = $16000

Depreciation expense 2018 = $16000

Accumalated Depreciation 2018 = $16000

ekkarill92 answered 1 year ago
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