Asked by Aleya Smith on Jul 07, 2024
Verified
A machine costing $450,000 with a 4-year life and an estimated salvage value of $30,000 is installed by Peters Company on January 1.The company estimates the machine will produce 1,050,000 units of product during its life.It actually produces the following units for the first 2 years: Year 1,260,000; Year 2,275,000.Enter the depreciation amounts for years 1 and 2 in the table below for each depreciation method.Show calculation of amounts below the table.
Double
Salvage Value
The projected end-of-life resale value of an asset.
Depreciation Method
A systematic approach to allocate the cost of tangible assets over their useful lives, reflecting the asset's consumption, obsolescence, or loss of value.
Productive Units
Measures or quantities of output produced, serving as a basis for allocating costs in some accounting systems.
- Gain insight into the fundamentals and calculation methods pertaining to depreciation, amortization, and depletion.
- Apply the units-of-production and accelerated depreciation methods.
Verified Answer
Straight-line: $450,000- $30,000/4 = $105,000 for each yearUnits-of-production: $450,000- $30,000/1,050,000 = $.40
Year 1: $.40 * 260,000 = $104,000; Year 2: $.40 * 275,000 = $110,000
Double-declining:
Year 1: $450,000 x .5 = $225,000; Year 2: ($450,000-225,000)x .5 = $112,500
Learning Objectives
- Gain insight into the fundamentals and calculation methods pertaining to depreciation, amortization, and depletion.
- Apply the units-of-production and accelerated depreciation methods.
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