Please Help! :) PlasticWorks Corporation bought a machine at the beginning of th

Question

Please Help! :)

PlasticWorks Corporation bought a machine at the beginning of the year at a cost of $17,600. The estimated useful life was five years, and the residual value was $2,800. Assume that the estimated productive life of the machine is 14,800 units. Expected annual production was: year 1, 4,600 units; year 2, 4,600 units; year 3, 2,800 units; year 4, 1,480 units; and year 5, 1,320 units. Required: Complete a amortization schedule for each of the alternative methods. Straight-line: Units-of-production: Double-declining-balance:

Explanation / Answer

Hi,

Please find the answer as follows:

Part A: Straight Line Method

Annual Depreciation = (17600 - 2800)/5 = 2960

Part B: Units of Production Method

Cost Per Unit = (17600 - 2800)/14800 = 1 Per Unit

Part C:

Annual Depreciation Rate = 2960/14800*100 = 20%

Double Declining Rate = 20%*2 = 40%

Depreciation for Fourth Year will be 1001.60 instead of (17600 - 13798.40)*.40 because the basic value cannot be be less than the real value.

Thanks.

Income Statement Balance Sheet Year Amortization Expense Cost Accumulated Depreciation Book Value At Acquistion



1 2960 17600 2960 14640 2 2960 17600 5920 11680 3 2960 17600 8880 8720 4 2960 17600 11840 5760 5 2960 17600 14800 2800

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