Question

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $84,600. The machine's useful life is estimated at 20 years, or 393,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 33,300 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 / = 0 Year 2 Depreciation Year end book value (Year 2)

	Units-of-production Depreciation Choose Numerator: / Choose Denominator: = Annual Depreciation Expense / = Depreciation expense per unit / = 0 Year Annual Production (units) Depreciation Expense 2

	Double-declining-balance Depreciation Choose Factors: x Choose Factor(%) = Annual Depreciation Expense x = Depreciation expense First year's depreciation x = Second year's depreciation x =

Answer 1

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 Depreciable base / Useful life = Depreciation expense 78600 / 20 = 3930 Year 2 Depreciation 3930 Year end book value (Year 2) 76740

	Units-of-production Depreciation Choose Numerator: / Choose Denominator: = Annual Depreciation Expense Depreciable base / Estimated production = Depreciation expense per unit 78600 / 393000 = 0.20 Year Annual Production (units) Depreciation Expense 2 33300 6660

	Double-declining-balance Depreciation Choose Factors: x Choose Factor(%) = Annual Depreciation Expense Beginning book value x Depreciation rate = Depreciation expense First year's depreciation 84600 x 10% = 8460 Second year's depreciation 76140 x 10% = 7614