Accounting Question

Solve the following questions:

(1) On January 2, 2015 Gillette Co. purchases and installs a new machine costing $300,000 with a five-year life and an estimated $50,000 salvage value.  Management estimates the machine will produce 190,000 units of product during its life.  Actual production of units is as follows: year 2015 – 34,000 units; year 2016 – 46,000 units; year 2017 – 56,000 units; year 2018 – 28,000 units; year 2019 – 26,000 units, etc.

Compute depreciation expense, accumulate depreciation, and book value for the first four years using the following depreciation methods:

(a) the straight-line method,

(b) the units-of-production method, and

(c) the declining-balance method also known as the double-declining-balance method.

2.    Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000.  Compute the depreciation for the first and second years of use by each of the following methods:

(a)    straight-line
(b)    units-of-production (1,200 hours first year; 2,250 hours second year)
(c)    declining-balance at twice the straight-line rate

(Round the answer to the nearest dollar.)

3.    Machinery is purchased on July 1 of the current fiscal year for $240,000.  It is expected to have a useful life of 4 years, or 25,000 operating hours, and a residual value of $15,000. Compute the depreciation for the last six months of the current fiscal year ending December 31 by each of the following methods:

(a)    straight-line
(b)    declining-balance at twice the straight-line rate
(c)    units-of-production (used for 1,600 hours during the current year)