ACG 3101 Lecture Notes - Lecture 21: Fixed Asset, Resource Depletion, Historical Cost
Get access
Related Documents
Related Questions
Paper Printing Company purchased a copy machine for $65,000onJanuaryâ 1, 2010. The copy machine had an estimated useful life offive years or 1,000,000 copies. Paper Printing estimated the copyâmachine's salvage value to be $5,000. The company made 250,000copies in 2010 and 190,000 copies in 2011.Requirements
1. Calculate the depreciation expense for eachyear using the straight line method.
- | = | / | = | Depreciation expense | |||||
- | = | / | = |
Now we can determine the depreciation per unit. â(Round to twodecimalâ places.)
/ | = | Cost per copy | ||||
/ | = |
Now that the cost per unit has been established we can nowdepreciate the copy machine based on the number of copiesproduced.
Year | x | = | Depreciation expense | |||
2010 | x | = | ||||
2011 | x | = |
2. Which method portrays the actual use of thisasset moreâ accurately? Explain your answer. When usingâstraight-line depreciation the depreciation expense
â¼
is higher at the end of life of the asset is lower at the end ofthe life of the asset remains the same every year . âStraight-linedepreciation assumes that the asset will be used
â¼
equally less more every year. Activity depreciation is alsoknown as
â¼
units of production straight line double declining balance . Theactivity method depends on the
â¼
actual estimated number of units produced.
Using theâ double-declining balanceâ method, calculate theannual depreciation expense that will be recorded each year for anasset that cost$18,400â,
has a useful life of fourâ years, and has an estimated salvagevalue of $3,300. Explain what accounting issueâ arises, if âany, inthe third and fourth years.
Determine the depreciable cost.
Cost | -. | Salvage value | = | Depreciable cost | ||
18400 | - | 3300 | = |
Complete the depreciation schedule using theâ double-decliningbalance method. â(Complete all inputâ boxes.)
Book | Annual | Accumulated | ||
Year | Rate | value | depreciation | depreciation |
1 |
2 |
3 |
4 |
Explain what accounting issueâ arises, ifâ any, in the third andfourth years.
Total depreciation charged over the life of the asset In thisâcase, the thirdâ year's depreciation â, and no depreciation ischarged the remaining depreciation is charged the same amount ofdepreciation is charged in the fourth year.