Question

Paper Printing Company purchased a copy machine for $65,000 on January 1, 2010. The copy machine had an estimated useful life of five years or 1,000,000 copies. Paper Printing estimated the copy machine's salvage value to be $5,000. The company made 250,000 copies in 2010 and 190.000 copies in 2011 Requirements 1. Calculate the depreciation expense for each year using the straight line method - Depreciation expenso Now we can determine the depreciation per unit. (Round to two decimal places) Cost per copy

Answer 1

Answer to Requirement 1. Calculation of Depreciation Expense using Straight Line Method: Depreciable Depreciation Residual Value Value / Useful Life Cost Expense 65,000 5,000 60,000 5 12,000 Calculation of Depreciation per Unit Expected Number of Depreciable Cost per Copy Value Copies 1,000,000 0.06 60,000

Depreciation Expense: Number of Depreciation Cost per Copy Year Copies Expense 0.06 2010 250,000 15,000 0.06 2011 190,000 11,400

Answer to Requirement 2.

When using Straight Line depreciation, the depreciation expense remains the same every year. Straight Line Depreciation assumes that the asset will be used equally every year. Activity depreciation is also known as Units of Production. The activity method depends on the actual number of units produced.