Question

[The following information applies to the questions displayed below.]

Exact Photo Service purchased a new color printer at the beginning of 2018 for $42,400. The printer is expected to have a four-year useful life and a $1,696 salvage value. The expected print production is estimated at 1,500,000 pages. Actual print production for the four years was as follows:

2018	547,700
2019	483,400
2020	377,200
2021	389,400
Total	1,797,700

The printer was sold at the end of 2021 for $2,096.

1. Compute the depreciation expense for each of the four years, using double-declining-balance depreciation. (Do not round your intermediate calculations. Round final answers to the nearest whole dollar amount. Leave no cells blank - be certain to enter "0" wherever required.)

b.Compute the depreciation expense for each of the four years, using units-of-production depreciation

3. Calculate the amount of gain or loss from the sale of the asset under each of the depreciation methods. (Amounts to be deducted should be indicated with minus sign.

Answer 1

A. Double decline balance method

Depreciation rate = 100 / useful life x 2

= 100 / 4 x 2

= 50%

Year	Book value	Depreciation rate	Depreciation expense
1	42,400	50%	21,200
2	21,200	50%	10,600
3	10,600	50%	5,300
4	5,300	50%	2,650
Total			39,750

Cost price 42,400 - depreciation 39,750 = written down value 2,650

Sale 2,096 - written down value 2,650 = -554 (loss)

B. Units of production method

Depreciation rate = cost - residual value / useful life in production

= 42,400 - 1,696 / 1,797,700

= 0.0226 per copy

Year	Copy	Rate per copy	depreciation expense
1	547,700	0.0226	12,378
2	483,400	0.0226	10,925
3	377,200	0.0226	8,525
4	389,400	0.0226	8,800
Total			40,628

Cost price 42,400 - depreciation 40,628 = written down value 1,772

Sale 2,096 - written down value 1,772 = 324 (gain)