Question

Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1, Year 1: Purchase price $ 71,000 Delivery cost $ 3,000 Installation charge $ 2,000 Estimated life 5 years Estimated units 146,000 Salvage estimate $ 3,000 During Year 1, the machine produced 42,000 units, and during Year 2 it produced 44,000 units. Required a. Determine the amount of depreciation expense for Year 1 and Year 2 using straight-line method. b. Determine the amount of depreciation expense for Year 1 and Year 2 using double-declining-balance method. c. Determine the amount of depreciation expense for Year 1 and Year 2 using units of production method. d. Determine the amount of depreciation expense for Year 1 and Year 2 using MACRS, assuming that the m

Answer 1

Answer:

a. The amount of depreciation expense for Year 1 and Year 2 using straight-line method is for year 1 and year 2 $14,600

b. the amount of depreciation expense for Year 1 and Year 2 using double-declining-balance is for year 1 $30,400  and for year 2 $18,240

c.  the amount of depreciation expense for Year 1 and Year 2 using units of production method is for year 1 $21,840  and for year 2 is $22,880

d. the amount of depreciation expense for Year 1 and Year 2 using MACRS is for year 1 $10,860  and for year 2 $18,612

Explanation:

a. To calculate the amount of depreciation expense for Year 1 and Year 2 using straight-line method we would have to make the following calculation:

Straight line Depreciation   = ($71,000 + $3,000 + $2,000- $3,000) /5 = $14,600

For each year same depreciation

B)  To calculate the amount of depreciation expense for Year 1 and Year 2 using double-declining-balance method we have to make the following calculations:

Double declining method = 1/5 * 2 = 40%

Year 1 depreciation -= $76,000 *40% = $30,400

Year 2   Depreciation = ($76,000 - $30,400) 40% = $18,240

c)  To calculate the amount of depreciation expense for Year 1 and Year 2 using units of production method we have to make the following calculations:

Unit production method

76000/146000 = 0.52

Year 1   42,000 *0.52 = $21,840

Year 2   44,000 * .52 = $22,880

d)  To calculate the amount of depreciation expense for Year 1 and Year 2 using MACRS we have to make the following calclations:

MACRS

Year 1   = 76000 *14.29% = $10,860

Year 2=   - 76000  *24.49% = $18,612