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Save & Exit Help Su Saved Required information [The following information applies to the questions displayed below Exact Photo Service purchased a new color printer at the beginning of 2018 for $38,800. The printer is expected to have a four-year useful life and a $1,552 salvage value. The expected print production is estimated at 1,500,000 pages. Actual print production for the four years was as follows: 2018 551,100 483,000 383, 300 386,100 2019 2020 2021 1,803, 500 Iotal The printer was sold at the end of 2021 for $1,752 Required a. 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 "O" wherever required.) Double-Declining Balance 2018 2019 2020 2021 Prev 1 of 6 Next

Answer 1

First question with all sub parts is being answered here:

a. Under double declining balance method, depreciation is calculated by the following formula:

Depreciation = 2 * 1 / N * (Cost - Accumulated depreciation)

where, n is the no. of years or useful life and accumulated depreciation is depreciation charged till date

For first year i.e. 2018, accumulated depreciation will be zero.

So, depreciation for first year 2018 will be:

Depreciation for 2018 = 2 * 1 / 4 * ($38800 - 0)

Depreciation = 2 * 1 / 4 * $38800 = $19400

Now, in 2019, accumulated depreciation will be $19400 (i.e. depreciation charged till date is depreciation for 2018)

Depreciation for 2019 will be:

Depreciation = 2 * 1 / 4 * ($38800 - $19400) = 2 * 1 / 4 * $19400 = $9700

Now, in 2020, accumulated depreciation will be $19400 + $9700 = $29100 (i.e. depreciation charged till date is depreciation for 2019)

Depreciation for 2020 will be:

Depreciation = 2 * 1 / 4 * ($38800 - $29100) = 2 * 1 / 4 * $9700 = $4850

Now, in 2021, accumulated depreciation will be $19400 + $9700 + $4850 = $33950 (i.e. depreciation charged till date is depreciation for 2020)

Depreciation for 2021 will be:

Depreciation = 2 * 1 / 4 * ($38800 - $33950) = 2 * 1 / 4 * $4850 = $2425

Total accumulated depreciation in 2021 = $19400 + $9700 + $4850 + $4850 = $38800

b. Under units of production method, first we will calculate the cost per unit and then we will calculate the depreciation expense.

Cost per unit = Cost - Salvage value / Estimated units

Estimated units = 1500000

Cost per unit = ($38800 - $1552) / 1500000 = $37248 / 1500000 = $0.025 per unit

In the next step, we will compute the depreciation expense as per below:

Depreciation expense = Cost per unit * No. of units produced

Depreciation for 2018 :

No. of units/ pages produced in 2018 was 551100, so

Depreciation for 2018 = $0.025 * 551100 = $13777

Depreciation for 2019:

No. of units / pages produced in 2019 was 483000, so

Depreciation for 2019 = $0.025 * 483000 = $12075

Depreciation for 2020:

No. of units / pages produced in 2020 was 383300, so

Depreciation for 2020 = $0.025 * 383300 = $9582.5

Depreciation for 2021:

Accumulated or total depreciation till this point = $13777 + $12075 + $9582 = $35434

In 2021, depreciation will be provided till salvage value of the printer, which is $1552. So, in 2021, depreciation expense will be:

Depreciation for 2021 = $38800 - $1552 - $35434 = $1814

Accumulated depreciation in 2021 = $13777 + $12075 + $9582 + $1814 = $37248

c. Calculation of gain or loss under double declining balance method:

Printer was sold in 2021 for $1752.

For calculating the gain or loss, we need to check the carrying value of the printer in 2021. Carrying value is:

Carrying value = Cost - Accumulated depreciation in 2021

Carrying value = $38800 - $38800 = $0

Now, Gain or loss = Sale - carrying value in 2021

Gain or loss = $1752 - $0 = $1752 (gain)

Calculation of gain or loss under units of production method:

Printer was sold in 2021 for $1752.

For calculating the gain or loss, we need to check the carrying value of the printer in 2021. Carrying value is:

Carrying value = Cost - Accumulated depreciation in 2021

Carrying value = $38800 - $37248 = $1552

Now, Gain or loss = Sale - carrying value in 2021

Gain or loss = $1752 - $1552 = $200 (gain)