Question

Required information Problem 7-5B Determine depreciation under three methods (L07-4) [The following information applies to the questions displayed below.) Cheetah Copy purchased a new copy machine. The new machine cost $106,000 including installation. The company estimates the equipment will have a residual value of $26,500. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows: Year Hours Used 2,800 2,000 2,000 3,200 AWN Problem 7-5B Part 1 Required: 1. Prepare a depreciation schedule for four years using the straight-line method. (Do not round your intermediate calculations.) CHEETAH COPY Depreciation Schedule-Straight-Line End of Year Amounts Depreciation Accumulated Book Year can Expense Depreciation Value 1 2 3 Totall

Answer 1

Year Cheetay Copy Depreciation Schedule - Straight Line End of the Year Accounts Depreciation Accumulated Book Value Expense Depreciation $15,900 $15,900 $90,100 $15,900 $31,800 $74,200 $15,900 $47,700 $58,300 $15,900 $63,600 $42,400 $15,900 $79,500 $26,500 U AWNA See Note (1) Year Cheetay Copy Depreciation Schedule - Double Declining Balance End of the Year Accounts Depreciation Accumulated Book Value Expense Depreciation $42,400 $42,400 $63,600 $25,440 $67,840 $38,160 $11,660 $79,500 $26,500 $79,500 $26,500 $79,500 $26,500 See Note (ii) $0 $0 Year Cheetay Copy Depreciation Schedule - Double Declining Balance End of the Year Accounts Depreciation Accumulated Book Value Expense Depreciation $27,832 $27,832 $78,168 $19,880 $47,712 $58,288 $19,880 $67,592 $38,408 $11,908 $79,500 $26,500 $0 $79,500 $26,500 See Note (iii)

Purchase Cost Salvage Value Useful Life (in years) $1,06,000 $26,500 Accumulated Depreciation Book Value Note (i) Straight Line Depreciation Schedule Straight line depreciation = (Initial Cost-Salvage Value) / Estimated useful life Depreciation for the year Year Actual Cost Depreciable Cost Useful Life Depreciation Expense $1,06,000 $79,500 / $ 15,900 $63,600 4 = $ 15,900 $47,700 / 3 = $15,900 $31,800 / 2 = $ 15,900 $15,900 / 1 = $ 15,900 5 = $15,900 $31,800 $47,700 $63,600 $79,500 $90,100 $74,200 $58,300 $42,400 $26,500 Note (ii) Double Declining Balance Method (DDBM) = 2/Useful Life* Book Value Depreciation for the year Depreciation Accumulated Date Actual Cost Book Value DDB rate Book Value Expense Depreciation $1,06,000 $1,06,000 x 0.4 = $42,400 $42,400 $63,600 $63,600 0.4 = $25,440 $67,840 $38,160 $11,660 $79,500 $26,500 SO $79,500 $26,500 $O $79,500 $26,500 In year 3, depreciation is provided for $11660, to restrict the book value of the eqipemtn to its salvage value i.e. $26500

Book Value Note (iii) Unit of Production depreciation Estimated operate 8000 hours (Initial Cost-Salvage Value) / Estimated units production - Depreciation per unit [($106000-$26500)/8000] = $ 9.94 per hours Depreciation for the year Actual Cost Depreciable Per Number of Date Depreciation Unit units Expense (A) $1,06,000 $9.94 x 2800 = $27,832 $9.94 x 2000 $19,880 $9.94 X 2000 = $19,880 $ 11,908 $O Accumulated Depreciation (C) (B) (A) - (C) $27,832 $47,712 $67,592 $79,500 $79,500 $78,168 $58,288 $38,408 $26,500 $26,500 In year 4, depreciation is provided for $11908, to restrict the book value of the eqipemtn to its salvage value i.e. $26500