Question

PlasticWorks Corporation bought a machine at the beginning of the year at a cost of $15,850. The estimated useful life was five years, and the residual value was $2,550. Assume that the estimated productive life of the machine is 13,300 units. Expected annual production was: year 1, 4,100 units; year 2, 4,100 units; year 3, 2,550 units; year 4, 1,330 units; and year 5, 1,220 units.

Required: 1. Complete a depreciation schedule for each of the alternative methods. (Enter all values as positive amount.) a. Straight-line. Income Statement Balance Sheet Depreciation Year Cost Accumulated Depreciation Book Value Expense At acquisition S 2 S 15.850 5 2 .880 2 ,650 2,660 2,660 2,650 2,650 15,850 15,850 15,850 15,850

Answer 1

a. Straight line method:

Depreciation expense = $15,850-2,550 / 5 = $2,660

	Income statement	Balance sheet
Year	Depreciation expense	Cost	Accumulated depreciation	Book value
At acquisition
1	$2,660	$15,850	$2,660	$13,190
2	2,660	15,850	5,320	10,530
3	2,660	15,850	7,980	7,870
4	2,660	15,850	10,640	5,210
5	2,660	15,850	13,300	2,550

b. Units of production:

Depreciation rate = $15,850-2,550/13,300 = $1

	Income statement	Balance sheet
Year	Depreciation expense	Cost	Accumulated depreciation	Book value
At acquisition
1	$4,100	$15,850	$4,100	$11,750
2	4,100	15,850	8,200	7,650
3	2,550	15,850	10,750	5,100
4	1,330	15,850	12,080	3,770
5	1,220	15,850	13,300	2,550

C. Double declining balance :

Depreciation rate = 100/5*2 = 40%

	Income statement	Balance sheet
Year	Depreciation expense	Cost	Accumulated depreciation	Book value
At acquisition
1	$6,340	$15,850	$6,340	$9,510
2	3,804	15,850	10,144	5,706
3	2,282	15,850	12,426	3,424
4	874 (3,424-2,550)	15,850	13,300	2,550