Question
In: Accounting
Depreciation Methods Clearcopy, a printing company, acquired a new press on January 1, 2019. The press...
Depreciation Methods
Clearcopy, a printing company, acquired a new press on January 1, 2019. The press cost $171,600 and had an expected life of 8 years or 4,500,000 pages and an expected residual value of $15,000. Clearcopy printed 691,900 pages in 2019. Do not round intermediate calculations. If required, round your answers to the nearest whole dollar.
Required:
1. Compute 2019 depreciation expense using the:
| 2019 | |||
| a. | Straight-line method | $ | |
| b. | Double-declining-balance method | $ | |
| c. | Units-of-production method | $ |
2. What is the book value of the machine at the end of 2019 under each method?
| Book Value | ||
| a. | Straight-line method | $ |
| b. | Double-declining-balance method | $ |
| c. | Units-of-production method | $ |
Solutions
Expert Solution
| 1) | 2019 | ||||||||||||
| a. | Straight-line method | $ 19,575 | |||||||||||
| b. | Double-declining-balance method | $ 42,900 | |||||||||||
| c. | Units-of-production method | $ 24,078 | |||||||||||
| Working: | |||||||||||||
| a. | Depreciation expense under Straight Line method | = | (Cost-Salvage Value)/Useful Life | ||||||||||
| = | (171600-15000)/8 | ||||||||||||
| = | $ 19,575 | ||||||||||||
| b. | Straight Line rate | = | 1/8 | = | 12.5% | ||||||||
| Double decline rate | = | 2 * 12.5% | = | 25% | |||||||||
| Depreciation expense for 2019 | = | Beginning of Year Book Value x double declinig depreciation rate | |||||||||||
| = | $ 1,71,600 | x | 25% | ||||||||||
| = | $ 42,900 | ||||||||||||
| c. | Depreciation expense per unit | = | Depreciable base/Total units of production | ||||||||||
| = | (171600-15000)/4500000 | ||||||||||||
| = | $ 0.0348 | per page | |||||||||||
| Depreciation expense for 2019 | = | Number of activity x Depreciation expense per unit | |||||||||||
| = | 6,91,900 | x | $ 0.0348 | ||||||||||
| = | $ 24,078 | ||||||||||||
| 2) | Book Value | ||||||||||||
| a. | Straight-line method | $ 1,52,025 | |||||||||||
| b. | Double-declining-balance method | $ 1,28,700 | |||||||||||
| c. | Units-of-production method | $ 1,47,522 | |||||||||||
| Working: | |||||||||||||
| Book Value | = | Costs - Accumulated depreciation expense | |||||||||||
| In year 1, Depreciation expense and accumulated depreciation is same. | |||||||||||||
| Costs | Accumulated Depreciation Expense | Ending Book Value | |||||||||||
| Straight-line method | $ 1,71,600 | $ 19,575 | $ 1,52,025 | ||||||||||
| Double-declining-balance method | $ 1,71,600 | $ 42,900 | $ 1,28,700 | ||||||||||
| Units-of-production method | $ 1,71,600 | $ 24,078 | $ 1,47,522 | ||||||||||
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