Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The machine cost $120,000, and its estimated useful life was four years or 920,000 cuttings, after which it could sell for $5,000.
Each method has a different formula. In the straight-line depreciation, each year's depreciation expense is the same. On the other hand, double-declining balance depreciation expense declines with the years. While the units of production method, depreciation expense varies according to use.
A) Straight-line:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (120,000 - 5,000)/4= $28,750 per year
B) Double declining balance:
Annual depreciation= 2*[(book value)/estimated life (years)]
Year 1= 2*(115,000/4)= 57,500
Year 2= 2*[(115,000 - 57,500)/4]= 28,750
Year 3= 2*[(57,500 - 28,750)/4]= 14,375
Year 4= 2*[(28,750 - 14,375)/4]= 7,187.5
C) Units of production:
Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced
Year 1= [(115,000)/920,000]*200,000= $25,000
Year 2= (0.125)*350,000= 43,750
Year 3= 0.125*260,000= $32,500
Year 4= 0.125*110,000= $13,750
