Question

On January 1, 2017, B Company purchased two machines for use in its production process.

Machine B: The recorded cost of this machine was $120,000.  Dill estimates that the useful life of the machine is 4 years with a $8,000 salvage value remaining at the end of that time period.

(b) Calculate the amount of depreciation expense that should be recorded for Machine B each year of its useful life under the following assumption. (1) Company uses the straight-line method of depreciation. (2) Company uses the declining-balance method. The rate used is twice the straight-line rate. (3) Company uses the units-of-activity method and estimates the useful life is 25,000 units. Actual usage: 2017= 5,500 units; 2018= 7,000 units; 2019= 8,000 units; 2020= 4,500 units. (c) Which method used to calculate depreciation on Machine B reports the lowest amount of depreciation expense in year 1 (2017)? The lowest amount in year 4 (2018)? The lowest total amount over the 4- year period? Book Value at Beginning of Year DDB Rate Annual Deprec Expense Accumulated Depreciation

Answer 1

Answer:- (61) Strought line method :- cost-salvage value - Useful life of asset Depreciation Expense - $120,000 - $8,000 U years = $28,000 per annum 1 b2) Declming balance method Depreciation rate as per straight line melhod : - xloo useful life e 5x100 - 254 25.1. rate of double declining balance : 2 x 25°/. -50% Book value at beginning of year Annual depreciation DOB late Expense Accumulatea depreciation 50% $69000 $ 120,000 $ 60,000 2017 208 $30,000 Sul.. $ 60,000 $90000 2019 $39000 501: $ 15000 $ 105,000 SD 2020 $1SDOO $1120,000 $ 7000 (15000 -- 5000)

Units of activity method'- cost- salivage value Depreciation Experte per undt = Total Estimated units = $120,000 - $ 8000 2.5000 = $4.48 pour unit for 2017 = $4.48 X 5300 units > $ 24,640 FOX 2018 4.48 X 1000 units = $ 31,360 For 2019 = $state $4.48 X 8000 units = $ 35,840 $4.48 x 4500 units FOD 2020 2 = $20,160 24,640 (C). The lowest amount of depreciation expense in year I (2017) $ 500 Teredoute dec e tte nettet le, units of activity method 10 The lower amount of depreciation expense in year 4 = $ 7000 te double declining balance melhod. MI) The three meltedy record the same amount of depreciation Over the 4-year period le, $112.000