Question

Problem #1 Breton Industries Limited installed a machine on September 5, 2020 that cost $335,000 that had a useful life of 5 years. The machine has an estimated salvage value at the end of its useful life of $35,000. The company's year-end is December 31. At the time the machine was purchased, it was estimated that the machine could produce 2,000,000 units of product over its useful life. Actual production over the life of the machine was as follows: Year Units 2020 137,000 2021 410,000 2022 455,000 2023 471,000 2024 461,000 2025 150,000 REQUIRED: Calculate depreciation expense over the useful life of this machine under each of the following methods nearest whole month method. Show your calculations on the back of this page. a) Straight-line b) Double Declining Balance c) Units-of-Production

Answer 1

Bookl - Microsoft Excel (Product Activation Failed) View X - File Home Insert Page Layout Formulas Data Review % Cut Calibri - 11 A A = = Ea Copy Paste Format Painter B I U P A E Clipboard Font * £ Autosum = Wrap Text Merge & Center General $ % Fill - , 8. Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Filter Editing Find & Select Alignment Number Cells B22 A E F F G H J K L MN o P Q I B C D For BRETON INDUSTRIES LIMITED, nm + NEAREST WHOLE MONTH METHOD MEANS : A full month of expense is recorded if an asset is held for fifteen days or more whereas no depreciation is recognized in a month where usage is less than fifteen days. Hence, the calculation is based on for Four Months i.e. September to December. 0 Straight Line Depreciation = (Cost - Salvage Value) / Estimated Life Therefore, Straight Line Depreciation = (335,000 - 35,000)/5 = $60,000 per year Therefore, Straight Line Depreciation for Four Months = 60,000 x 4/12 = $20,000 8 Ans: a 9 10 11 12 13 Ans: b 14 15 16 17 18 19 Double Declining Balance Depreciation = 2 x Straight Line Depreciation* (* During this Salvage Value is not considered) Therefore, Straight Line Depreciation = 335,000 / 5 = $67,000 Therefore, Double Declining Balance Depreciation = 2 x $67,000 = $134,000 per Year. Therefore, Double Declining Balance Depreciation for four months = $134,000 x 4/12 = $44,666.67 Units of Production Method = (Cost - Salvage Value) x Number of Units Produced in the period of calculating Depreciation / Total Expected Production Depreciation = (335,000 - 35,000) x 137,000/ 2,000,000 units = $20,550 21 22 Sheet1 Sheet2 Sheet3 Ready BOJ 120% -40 15-Apr-20

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