Question

Assume Organic Ice Cream Company, Inc., bought a new ice cream production kit (pasteurizer/homogenizer, cooler, aging vat, freezer, and filling machine) at the beginning of the year at a cost of $16,800. The estimated useful life was four years, and the residual value was $1,280. Assume that the estimated productive life of the machine was 9,700 hours. Actual annual usage was 3,880 hours in Year 1; 2,910 hours in Year 2; 1,940 hours in Year 3; and 970 hours in Year 4.

Required:

1. Complete a separate depreciation schedule for each of the alternative methods.

a. Straight-line.

b. Units-of-production.

c. Double-declining-balance.
Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 1C Complete a depreciation schedule using the Straight-line method. (Do not round intermediate calculations.) Accumulated Depreciation Net Book Value Year Depreciation Expense At acquisition 1 21

Answer 1

a) Straight line depreciation

Year	Depreciation expense	Accumulated depreciation	Net book value
At acquisition			16800
1	(16800-1280/4) = 3880	3880	12920
2	3880	7760	9040
3	3880	11640	5160
4	3880	15520	1280

b) Unit of production depreciation

Depreciation expense per unit = (16800-1280/9700) = 1.60

Year	Depreciation expense	Accumulated depreciation	Net book value
At acquisition			16800
1	3880*1.6 = 6208	6208	10592
2	2910*1.6 = 4656	10864	5936
3	1940*1.6 = 3104	13968	2832
4	1552	15520	1280

c) Double decline

Rate = 100/4*2 = 50%

Year	Depreciation expense	Accumulated depreciation	Net book value
At acquisition			16800
1	16800/2 = 8400	8400	8400
2	8400/2 = 4200	12600	4200
3	4200/2 = 2100	14700	2100
4	820	15520	1280