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Assume Purity Ice Cream Company, Inc., in Ithaca, NY, bought a new ice cream production kit (pasteurizer/homogenizer, cooler, aging vat freezer, and filling machine) at the beginning of the year at a cost of $152,000. The estimated useful life was four years, and the residual value was $8,000. Assume that the estimated productive life of the machine was 16,000 hours. Actual annual usage was 5,500 hours in Year ; 3,800 hours in Year 2; 3,200 hours in Year 3; and 3,500 hours in Year 4.
Required:
1. Complete a separate depreciation schedule for each of the alternative methods. Round your answers to the nearest dollar.
Straight-line
2. Units-of-production (use two decimal places for the per unit output factor).
3. Double-declining-balance.

Respuesta :

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Answer:

A. Straight-line method

Year Depreciation Expense Accumulated Depreciation Net Book Value

Year 1 $36,000 $36,000 $116,000

Year 2 $36,000 $72,000 $80,000

Year 3 $36,000 $108,000 $44,000

Year 4 $36,000 $144,000 $8,000

B. Units of production method

Year 1 $49,500 $49,500 $102,500

Year 2 $34,200 $99,000 $68,300

Year 3 $28,800 $148,500 $39,500

Year 4 $31,500 $198,000 $8,000

C. Double-declining balance method

Year 1 $76,000 $76,000 $76,000

Year 2 $38,000 $152,000 $38,000

Year 3 $19,000 $228,000 $19,000

Year 4 $9,500 $304,000 $9,500

Explanation:

a. Calculation to Complete a separate depreciation using the straight line method:

STRAIGHT LINE METHOD

First step is to calculate the Depreciable value of the asset using this formula

Depreciable value of the asset = Total cost of asset - Estimated salvage value of asset

Let plug in the formula

Depreciable value of the asset= $152,000 - $8,000

Depreciable value of the asset= $144,000

Second step is to calculate the Depreciation rate per year

Depreciation rate per year = (1/4) * 100 year useful life

Depreciation rate per year = 25%

Third step is to calculate the Annual depreciation using this formula

Annual depreciation = Depreciable value x Depreciation rate per year

Let plug in the formula

Annual depreciation= $144,000 x 25%

Annual depreciation = $36,000

Now let Complete the Depreciation schedule

Year Depreciation Expense Accumulated Depreciation Net Book Value

At Acquisition $152,000

Year 1 $36,000 $36,000 $116,000

($152,000- $36,000=$116,000)

Year 2 $36,000 $72,000 $80,000

($152,000 - $72,000=$80,000)

Year 3 $36,000 $108,000 $44,000

($152,000 - $108,000=$44,000)

Year 4 $36,000 $144,000 $8,000

($152,000 - $144,000=$8,000)

b. Calculation to determine the depreciation using units of production method

UNITS OF PRODUCTION METHOD

First step is to calculate the Depreciation amount per year using this formula

Depreciation = ( Depreciable value of the asset x Annual usage of hours ) / Total estimated machine hours

Let plug in the formula

Year 1 = ($144,000 x 5,500 hours) / 16,000 hours Year 1 = $49,500

Year 2 = ($144,000 x 3,800 hours) / 16,000 hours

Year 2= $34,200

Year 3 = ($144,000 x 3,200 hours) / 16,000 hours

Year 3= $28,800

Year 4 = ($144,000 x 3,500 hours) / 16,000 hour Year 4= $31,500

Now let Complete the Depreciation schedule

Year Depreciation Expense Accumulated Depreciation Net Book Value

At Acquisition $152,000

Year 1 $49,500 $49,500 $102,500

($152,000 - $49,500=$102,500)

Year 2 $34,200 $99,000 $68,300

($152,000 - $99,000=$68,300)

Year 3 $28,800 $148,500 $39,500

($152,000 - $148,500=$39,500)

Year 4 $31,500 $198,000 $8,000

($152,000 - $198,000=$8,000)

c. Calculation to determine the depreciation using double-declining balance method

DOUBLE-DECLINING BALANCE METHOD

First step is calculate the Depreciation rate using this formula

Depreciation rate = 1/useful life * 100

Let plug in the formula

Depreciation rate = (1/4) * 100

Depreciation rate = 25%

Second step is to calculate the Depreciation per year using this formula

Double-declining balance = 2 x cost of the asset x Depreciation rate

Let plug in the formula

Year 1 depreciation = 2 x $152,000 x 25%

Year 1 depreciation = $76,000

Year 2 depreciation = 2 x ($152,000 - $76,000) x 25%

Year 2 depreciation = $38,000

Year 3 depreciation = 2 x ($152,000 - $76,000 - $38,000) x 25%

Year 3 depreciation = $19,000

Year 4 depreciation = 2 x ($152,000 - $76,000 - $38,000 - $19,000) x 25%

Year 4 depreciation = $9,500

Now let Complete the Depreciation schedule

Year Depreciation Expense Accumulated Depreciation Net Book Value

At Acquisition $152,000

Year 1 $76,000 $76,000 $76,000

($152,000-$76,000=$76,000)

Year 2 $38,000 $152,000 $38,000

($76,000+$76,000=$152,000)

Year 3 $19,000 $228,000 $19,000

($152,000+$76,000=$228,000)

Year 4 $9,500 $304,000 $9,500

($228,000+$76,000=$304,000)

Therefore the Complete a separate depreciation schedule for each of the alternative methods are:

A. Straight-line method

Year Depreciation Expense Accumulated Depreciation Net Book Value

Year 1 $36,000 $36,000 $116,000

Year 2 $36,000 $72,000 $80,000

Year 3 $36,000 $108,000 $44,000

Year 4 $36,000 $144,000 $8,000

B. Units of production method

Year 1 $49,500 $49,500 $102,500

Year 2 $34,200 $99,000 $68,300

Year 3 $28,800 $148,500 $39,500

Year 4 $31,500 $198,000 $8,000

C. Double-declining balance method

Year 1 $76,000 $76,000 $76,000

Year 2 $38,000 $152,000 $38,000

Year 3 $19,000 $228,000 $19,000

Year 4 $9,500 $304,000 $9,500

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