Ask Question
8 May, 22:03

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.)

+1
Answers (1)
  1. 8 May, 23:32
    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?
Find 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 you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers