Calculate and analyze depreciation under alternative methods.

Schilig & Gray Industries purchased a new machine at the beginning of 2011 for $9,500. The company expected the machine to last for four years and have a salvage value of $500. The productive life of the machine was estimated to be 180,000 units. Yearly production was as follows: in 2011 it produced 50,000  units; in 2012 it produced 45,000 units; in 2013 it produced 30,000 units, and in 2014 it produced 55,000 units.

 

Requirements

1. Calculate the depreciation expense for each year of the four-year life of the machine using the following methods. (Round to the nearest dollar.)

a . Straight-line method

b. Double- declining balance method

c. Activity method using units

 

2. For each method, give the amount of accumulated depreciation that would be shown on the balance sheet at the end of the year.

 

3. Calculate the book value of the machine at the end of the year for each method.

2

>Sheet

1

–

2

A

6
7

Amount

Amount

11

Amount

Amount

Amount

Amount

20

Year

1 2011

2 2012

3 2013

4 2014

$ – 0 $ – 0

2011

2012 – 0 – 0 – 0

2013 – 0 – 0 – 0

2014 – 0 – 0 – 0

																																																																																											Problem	6	7	A	Name
Section
B	C	D	E	F	G	H
5	Data Input Section:	Schillig & Gray Industries
Cost of asset, January 1,	20	11							Amount
8	Estimated salvage value
9	Estimated useful life
10		Year	Units produced
		2011
12			2012
1	3			2013
1	4			2014
15	Total units produced over life of machine	Formula 1
16	Cost per unit (cost-residual/units)	Formula 2
17	Output Section:
18	Parts 1,2	Depreciation Expense Per Year
19	Double
Straight	Activity	Declining
21	Line	Method	Balance
22	Formula 3	Formula 7	Formula 11
23	Formula 4	Formula 8	Formula 12
24	Formula 5	Formula 9	Formula 13
25	Formula 6	Formula 10	Formula 14
26			$									– 0
27
28	Helpful Hint:
29	Use the following functions to calculate depreciation
30	=SLN(cost,salvage,life)
31	=DDB(cost,salvage,life,period)
32
33	Part 3.	Book Value of the Asset
34	End of Year	Straight Line	Activity Method	Double Declining Balance
35	Formula 15	Formula 16	Formula 17
36
37
38
39
End of Problem

&LReimers, Financial Accounting 3e

Sheet2

Sheet3