Question

rontr Alignment Number 19 1 DEPRECIATION 2 A machine with a cost of $260,000 has an estimated salvage value of $20,000 and an estimated life of 6 years or 15,000 hours 4 It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year? a. 6 1) 7 8 9 10 What is the amount of depreciation for the first full year, using the double declining- 11 balance method? (Do not round the rate) 12 1) 13 2) 14 15 Assuming the units-of-production method, what is the amount of depreciation for the first full year during which the machine was used 4,500 hours? 16 C. 17 1) Notes Receivable Depreciation Assets Bank Reconciliation Uncollectible Accounts Select destination and press ENTER or choose Paste Type here to search

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Answer 1

Answer to first question in the list: 1) Under straight-line method, Annual depreciation expense Depreciable cost / Useful life of the asset $260,000 Capitalized cost -$20,000 Less: Salvage value Depreciable cost Useful life of the asset, years $240,000 6 $40,000 $240000 6 years] Depreciation expense for full year Under Double Declining Balance (DDB) method, Depreciation percentage (1 Useful life of the asset) x 2 2) Therefore, Depreciation percentage (1/6) x 2 = 33.33% Under DDB method, depreciable cost should be cost of the asset as it doesn't consider resale value in its depreciation calculation unless the book value goes below residual value in any of the years. When an asset is depreciated using DDB method, it shall be switched to straight-line depreciation method when depreciation expense for any year is less than depreciation under straight line method $86,667 [$260000 x 33.33%] Depreciation expense for full year

Under units-of-production method, Depreciation expense [Depreciable cost Expected total machine hours] x Actual machine hours used 3) Capitalized cost $260,000 $20,000 $240,000 Less: Residual value Depreciable cost Expected machine hours 15,000 $16 $240000 15000 hours] Depreciation expense per hour Machine hours used during the year 4,500 $72,000 [4500 x $16] Depreciation expense for full year