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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Depreciation Methods

Graphic Design Inc. purchased a state-of-the-art laser engraving machine for $65,200. Graphic Design determined that the system had an expected life of 10 years (or 1,500,000 items engraved) and an expected residual value of $8,200.

Required:

1. Determine the amount of depreciation expense for the first and second years of the machine’s life using the (a) straight-line and (b) double-declining-balance depreciation methods.

2. If the number of items engraved the first and second years was 120,000 and 135,000, respectively, compute the amount of depreciation expense for the first and second years of the machine’s life using the units-of-production depreciation method.

3. Compute the book values for all three depreciation methods as of the end of the first and second years of the system’s life.

4. CONCEPTUAL CONNECTION factors might management consider when selecting among depreciation methods?

To determine

(a)

Introduction:

The straight-line method means an asset is depreciated by the fixed value every year over the asset’s life. This amount calculates by the total cost of assets divided by the life of an asset.

Double declining balance method means company records the deprecation value 2 times of straight-line method. It’s just because of benefit of assets to be long term.

To choose:

The amount of depreciation expense for the first and second year of the machine’s life using the(a) straight line method.

(b) Double-declining balance depreciation method.

Explanation
  1. Straight line method = cost of asset + installation - salvage value of assts useful lif of assets

    = $65200$820010=$5700

  2. Double declining depreciation first year = Net book value ×</
To determine

(b)

Introduction:

If depreciation calculates by the production method, then deprecated value will be calculated by how many units produced by the assets in a particular year.

To choose:

The amount of depreciation expense for the first year and second year of the machine’s life using the units of production depreciation method.

To determine

(c)

Introduction:

Book value means such value which is calculated, accumulated depreciation reduces form the total cost of machine.

If depreciation calculate by the production method, then deprecated value will be calculated by how many units produced by the assets in a particular year.

The straight-line method means an asset is depreciated by the fixed value every year over the asset’s life This amount calculates by the total cost of assets divided by the life of an asset.

To choose:

The book value for all three depreciation methods as of the end of the first and second year of the system’s life.

To determine

(d)

Introduction:

Book value means such value which is calculate, accumulated depreciation reduces form the total cost of machine.

If depreciation calculate by the production method, then deprecated value will be calculated by how many units produced by the assets in a particular year.

The straight-line method means an asset is depreciated by the fixed value every year over the asset’s life. This amount calculates by the total cost of assets divided by the life of an asset.

To choose:

The factor management considers when selecting among depreciation methods.

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