Ask Question
30 July, 20:48

Depreciation Methods On January 2, 2018, Skyler, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $120,000, and its estimated useful life was four years or 920,000 cuttings, after which it could be sold for $5,000. Required a. Calculate each year's 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 200,000; 350,000; 260,000; and 110,000.)

+2
Answers (1)
  1. 30 July, 21:20
    0
    Instructions are listed below.

    Explanation:

    Giving the following information:

    The machine cost $120,000, and its estimated useful life was four years or 920,000 cuttings, after which it could sell for $5,000.

    Each method has a different formula. In the straight-line depreciation, each year's depreciation expense is the same. On the other hand, double-declining balance depreciation expense declines with the years. While the units of production method, depreciation expense varies according to use.

    A) Straight-line:

    Annual depreciation = (original cost - salvage value) / estimated life (years)

    Annual depreciation = (120,000 - 5,000) / 4 = $28,750 per year

    B) Double declining balance:

    Annual depreciation = 2*[ (book value) / estimated life (years) ]

    Year 1 = 2 * (115,000/4) = 57,500

    Year 2 = 2*[ (115,000 - 57,500) / 4] = 28,750

    Year 3 = 2*[ (57,500 - 28,750) / 4] = 14,375

    Year 4 = 2*[ (28,750 - 14,375) / 4] = 7,187.5

    C) Units of production:

    Annual depreciation = [ (original cost - salvage value) / useful life of production in units]*units produced

    Year 1 = [ (115,000) / 920,000]*200,000 = $25,000

    Year 2 = (0.125) * 350,000 = 43,750

    Year 3 = 0.125*260,000 = $32,500

    Year 4 = 0.125*110,000 = $13,750
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Depreciation Methods On January 2, 2018, Skyler, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers