Question

LO 9 E9-6 Computing Depreciation under Alternative Methods Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $22.000. The estimated useful life was five years and the residual value was $2,000. Assume that the esti- mated productive life of the machine is 10,000 units. Expected annual production was year 1, 2,000 units; year 2, 3,000 units; year 3, 2,000 units; year 4, 2,000 units; and year 5, 1,000 units. Required: 1. Complete a depreciation schedule for each of the alternative methods. Round answers to the nearest dollar. a. Straight-line. b. Units-of-production. c. Double-declining-balance. Income Statement Depreciation Expense Balance Sheet Accumulated Depreciation Year Computation Cost Book Value At acquisition

Answer 1

a. Straight-line

		Income	Balance
		Statement	Sheet
		Depreciation		Accumulated
Year	Computation	Expense	Cost	Depreciation	Book Value
At acquisition			22000		22000
1	($22000 - $2000)/5	4000	22000	4000	18000
2		4000	22000	8000	14000
3		4000	22000	12000	10000
4		4000	22000	16000	6000
5		4000	22000	20000	2000

b. Units-of-production

		Income	Balance
		Statement	Sheet
		Depreciation		Accumulated
Year	Computation	Expense	Cost	Depreciation	Book Value
At acquisition			22000		22000
1	($22000 - $2000) x 2000/10000	4000	22000	4000	18000
2	($22000 - $2000) x 3000/10000	6000	22000	10000	12000
3	($22000 - $2000) x 2000/10000	4000	22000	14000	8000
4	($22000 - $2000) x 2000/10000	4000	22000	18000	4000
5	($22000 - $2000) x 1000/10000	2000	22000	20000	2000

c. Double-declining-balance

Straight-line depreciation rate = 100%/5 years = 20%

Double-declining depreciation rate = 2 x 20% = 40%

		Income	Balance
		Statement	Sheet
		Depreciation		Accumulated
Year	Computation	Expense	Cost	Depreciation	Book Value
At acquisition			22000		22000
1	($22000 x 40%)	8800	22000	8800	13200
2	($13200 x 40%)	5280	22000	14080	7920
3	($7920 x 40%)	3168	22000	17248	4752
4	($4752 x 40%)	1901	22000	19149	2851
5		851	22000	20000	2000