Schrade Company bought a machine for $136,000 cash. The estimated useful life was four years and the estimated residual value was $5,340. Assume that the estimated useful life in productive units is 139,000. Units actually produced were 62,000 in Year 1 and 64,000 in Year 2. Required: 1. Determine the appropriate amounts to complete the following schedule. Method of Depreciation Depreciation Expense for Net Book Value at the End of Year 1 Year 2 Year 1 Year 2 Straight-line Units-of-production Double-declining-balance 2-a. Which method would result in the lowest Earnings per Share for Year 1? Straight-line Units-of-production Double-declining-balance 2-b. Which method would result in the lowest Earnings per Share for Year 2? Straight-line Units-of-production Double-declining-balance 3. Which method would result in the highest amount of cash outflows in Year 1? Straight-line Units-of-production Double-declining-balance
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Schrade Company bought a machine for $136,000 cash. The estimated useful life was four years and the estimated residual value was $5,340. Assume that the estimated useful life in productive units is 139,000. Units actually produced were 62,000 in Year 1 and 64,000 in Year 2.
Required:
1. Determine the appropriate amounts to complete the following schedule.
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2-a. Which method would result in the lowest Earnings per Share for Year 1?
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2-b. Which method would result in the lowest Earnings per Share for Year 2?
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3. Which method would result in the highest amount of
| Straight-line |
| Units-of-production |
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Double-declining-balance |
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