On January 2, 2015, Roth, Inc. purchased a laser cutting machine to be used in the...
On January 2, 2015, Roth, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $130,000, and its estimated useful life was four years or 1,250,000 cuttings, after which it could be sold for $5,000. Required a. Calculate each year’s(2015-2019) depreciation expense for the machine's useful life under each of the following depreciation methods (round all answers to the nearest dollar): 1. Straight-line. 2. Double-declining balance. 3. Units-of-production. (Assume annual production in cuttings of 310,000; 460,000; 380,000; and 100,000.)
Homework Answers
1.
| Straight line Method | ||||
| Year | cost of equipment | Less: Salvage value | Depreciable value | Depreciation |
| 2015 | $ 130,000 | $ 5,000 | $ 125,000 | $125,000/4 = $31,250 |
| 2016 | $ 130,000 | $ 5,000 | $ 125,000 | $125,000/4 = $31,250 |
| 2017 | $ 130,000 | $ 5,000 | $ 125,000 | $125,000/4 = $31,250 |
| 2018 | $ 130,000 | $ 5,000 | $ 125,000 | $125,000/4 = $31,250 |
2.
| Depreciation under DDB Method | |||
| Year - a | Net Book value, beginning of year - b | Double declained depreciation - c = b/Life of assets*2 | Net book value, End of the year - d = b-c |
| 2015 | $ 130,000 | $ 65,000 | $ 65,000 |
| 2016 | $ 65,000 | $ 32,500 | $ 32,500 |
| 2017 | $ 32,500 | $ 16,250 | $ 16,250 |
| 2018 | $ 16,250 | $16,250-$5,000 = $11,250 | $ 5,000 |
3.
| Year | Units produced | Depreciation (($130,000-$5,000) / 1,250,000 * units produced) |
| 2015 | 310,000 | $ 31,000 |
| 2016 | 460,000 | $ 46,000 |
| 2017 | 380,000 | $ 38,000 |
| 2018 | 100,000 | $ 10,000 |
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