Question

Required information [The following information applies to the questions displayed below.) Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $43,500. The machine's useful life is estimated at 10 years, or 385.000 units of product, with a $5,000 salvage value. During its second year, the machine produces 32,500 units of product. Determine the machine's second-year depreciation and year end book value under the straight line method. Straight-Line Depreciation Choose Numerator: Choose Denominator: Annual Depreciation Expense - Depreciation expense Year 2 Depreciation Year end book value (Year 2)

Answer 1

Choose Numerator Cost - Salvage Value 43500-5000 / 1/ Straight line Depreciation Choose Denominator = Estimated Useful Life = 10 Annual Depreciation Expense Annual Depreciation Expense $3,850 Year 2 Depreciation Year end book value year 2 $3,850 $35,800 In straight line method depreciation expense is same for the years Year end book value of year 2 is calculated by deducting depreciation of year 1 and year 2 from cost value of asset. 43500-3850-3850 = 35800 / 1 Choose Numerator Cost - Salvage Value 43500-5000 Annual Production units 32500 Unit of Production Choose Denominator = Total units of production - 385000 Depreciation Expenses $3,250 Annual Depreciation Expense Depreciation Expense per unit $0.10 Year 2 Depreciation expense is calculated by multiplying units produced in year 2 by depreciation expense per unit. 32500 x 0.10 = 3250. Choose Factor Double Declining Balance Depreciation Choose Factor% = Annual Depreciation Expense Double the straight line x rate Depreciation Expense 20% = 8700 x 20% - 6960 First year depreciation Second year depreciation Beginning Book Value 43500 x 34800 Depreciation % = (1/useful life)x 2 = (1/10)x2 = 0.20. now convert to percentage by multiplying by 100 = 0.20 x 100 = 20% beginning book value of year 2 = book value of yaer 1- depreciation of year 1 = 43500-8700= 34800