Question

Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $80,600. The machine's useful life is estimated at 10 years, or 388,000 units of product, with a $3,000 salvage value. During its second year, the machine produces 32,800 units of product. Exercise 8-4 Straight-line depreciation LO P1 Determine the machine's second-year depreciation and year end book value under the straight-line method. Straight-Line Depreciation Annual Depreciation Expense Choose Denominator Choose Numerator: / Depreciation expense Year 2 Depreciation Year end book value (Year 2)

Answer 1

Straight-Line Depreciation

Choose Numerator:	/	Choose Numerator:	=	Annual Depreciation Expense
Cost minus Salvage	/	Estimated Useful Life (years)	=	Depreciation Expense
77600	/	10	=	7760
Year 2 Depreciation	$7760
Year End Book Value (Year 2)	$41,080

Year End Book Value (Year 2) = 80600 - 7760 -7760 = $65,080

units-of-production method.

Choose Numerator:	/	Choose Numerator:	=	Annual Depreciation Expense
Cost minus Salvage	/	Estimated units of product	=	Depreciation Expense per unit
77600	/	388000	=	0.20
Year 2 annual production	32800
Year 2 Depreciation expense	$6560

Double declining method.

Net book value * [ 2/ useful life] = depreciation expense

First year depreciation = 80600 * [ 2/10] = 16120

Second year depreciation = 64480 * [ 2/10] = 12896