Question

Cold As Iced CoffeeCold As Iced Coffee

purchased a coffee drink machine on January​ 1,

20182018​,

for

$ 57 comma 000$57,000.

Expected useful life is

1010

years or

50 comma 00050,000

drinks. In

20182018​,

12 comma 00012,000

drinks were​ sold, and in

20192019​,

16 comma 00016,000

drinks were sold. Residual value is

$ 2 comma 000$2,000.

Read the requirements

LOADING...

.Requirement 1. Determine the depreciation expense for

20182018

and

20192019

using the following​ methods: (a)​ Straight-line (SL),​ (b) Units of production​ (UOP), and​ (c) Double-declining-balance​ (DDB).For each method​ (starting with​ (a) the​ straight-line method), select the appropriate formula needed to compute annual depreciation and then determine depreciation expense under that method for

20182018

and

20192019.

​(Round any depreciation expense per unit amounts to the nearest cent and all other amounts to the nearest whole​ dollar.)

		Annual Depreciation Formula	2018	2019
a.	SL

b.

UOP

c.

DDB

Requirement 2. Prepare a schedule that shows annual depreciation​ expense, accumulated​ depreciation, and book value for

20182018

and

20192019

using the three depreciation methods from Requirement 1.

a. Begin with the​ straight-line method.

Review your computations from Requirement 1.

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a. Straight-line
	Annual Depreciation	Accumulated
Year	Expense	Depreciation	Book Value
1-1-2018
12-31-2018
12-31-2019

b. Prepare a schedule for the​ units-of-production method.

Review your computations from Requirement 1.

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b. Units-of-production
	Annual Depreciation	Accumulated
Year	Expense	Depreciation	Book Value
1-1-2018
12-31-2018
12-31-2019

c. Prepare a schedule for the​ double-declining-balance method.

Review your computations from Requirement 1.

LOADING...

c. Double-declining-balance
	Annual Depreciation	Accumulated
Year	Expense	Depreciation	Book Value
1-1-2018
12-31-2018
12-31-2019

Requirement 3. Assume that

Cold As Iced CoffeeCold As Iced Coffee

sold the equipment for

$ 38 comma 000$38,000

cash on July​ 1,

20202020.

Assume that management has depreciated the equipment by using the​ double-declining-balance method. Record

Cold As Iced CoffeeCold As Iced Coffee​'s

depreciation for

20202020

and the sale of the equipment on July​ 1,

20202020.

​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)Begin by recording

Cold As Iced CoffeeCold As Iced Coffee​'s

depreciation for

20202020.

Date			Accounts and Explanation	Debit	Credit
2020
Jul. 1

Now record the sale of the equipment on July​ 1,

20202020.

Date			Accounts and Explanation	Debit	Credit
2020
Jul. 1

Choose from any list or enter any number in the input fields and then continue to the next question.

1.	Determine the depreciation expense for 20182018 and 20192019 using the following​ methods:
	a.	​Straight-line
	b.	​Units-of-production
	c.	​Double-declining-balance
2.	Prepare a schedule that shows annual depreciation​ expense, accumulated​ depreciation, and book value for 20182018 and 20192019 using the following​ methods:
	a.	​Straight-line
	b.	​Units-of-production
	c.	​Double-declining-balance
3.	Assume that Cold As Iced CoffeeCold As Iced Coffee sold the equipment for $ 38 comma 000$38,000 cash on July​ 1, 20202020. Assume that management has depreciated the equipment by using the​ double-declining-balance method. Record Cold As Iced CoffeeCold As Iced Coffee​'s depreciation for 20202020 and the sale of the equipment on July​ 1, 20202020.

Answer 1

Cost of machine on Jan 1 2018 . 57,000

Useful life . 10 years, 50,000 drinks

Residual value . 2,000

1) Depreciation of year 2018 and 2019

A . Straight line depreciation method

Cost of machine - salvage value/Useful life

57,000 - 2,000/10 years = 5,500

Depreciation for 2018= 5,500

Depreciation for 2019 =5,500

B.Units of production

(Cost of machine - salvage value)* Drink sold in the year/Total drinks sold in useful life

Depreciation of 2018= (57,000 - 2,000)*12,000/50,000

=13,200

Depreciation of 2019= (57,000 -2000)*16,000/50,000

=17,600

C.Double declining balance method

Depreciation Rate = cost/ useful life

57,000/10years= 5700

5700*100/57,000= 10%

Double declining rate= 10%×2= 20%

Depreciation for 2018= 57,000×20%=11,400

Depreciation for 2019= (57,000 - 11,400) × 20%=9,120

2. Depreciation schedule

A.Straight line balance method

		Deprecation expense	Accumulated depreciation	book value ending
01-01-2018				57,000
12-31-2018		5,500	5,500	51,500
12-31-2019		5,500	11,000	46,000

B.Unit of production Method

		depreciation expense	Accumulated depreciation	book value ending
01-01-2018				57,000
12-31-2018		13,200	13,200	43,800
12-31-2019		17,600	30,800	26,200

C. Double declining balance method

		depreciation expense	Accumulated depreciation	book value ending
01-01-2018				57,000
12-31-2018		11,400	11,400	45,600
12-31-2019		9,120	20,520	36,480

3. Depreciation of 2020 when assets sold on july1, 2020

Depreciation for 2020 = 9,120×6 moths/12 months

=4,560

Date	Accounts and explaination	amonut	amount
2020
July1	Depreciation expenses	4,560
	To Accumulated depreciation		4,560
	(Depreciation charged on machinery)
July1	cash	38,000
	Accumulated depreciation	15,960
	Loss on sale	3,040
	Machinery		57,000

Book value of assets on july 1,2020=45,600 - 4,560

=41,040

Loss on sale = Book value- sale value

41,040 - 38,000 = 3,040