Phigam Steel purchases a machine on January 1 for $28,900. The machine has an es
ID: 2465021 • Letter: P
Question
Phigam Steel purchases a machine on January 1 for $28,900. The machine has an estimated useful life of seven years, during which time it is expected to produce 114,900 units. Salvage value is estimated at $1,410. The machine produces 15,550 and 16,240 units in its first and second years of operation, respectively.
Calculate depreciation expense for the machine using the straight-line method of depreciation. If required, round your answer to nearest whole value.
Calculate depreciation expense for the machine's first two years using the double-declining-balance method of depreciation. If required, round your answers to nearest whole value.
(NOTE: When calculating depreciation, round intermediate calculations to four decimals and use your rounded answer for Year 1 to calculate Year 2.)
Calculate depreciation expense for the machine 's first two years using the units-of-activity method of depreciation. (NOTE: When calculating depreciation, round intermediate calculations to two decimals places.)
Explanation / Answer
Under Straight Line Method Depreciation Expense = {$28900 (Cost) - 1410 (salvage Value)} / 7 Years = $3927.14 Under Double Declining Balance Method Dep. Rate under Straight Line Method = 14.29% Dep. Rate under Double Declining Methos = 2 X 14.29% = 28.58% Dep Exp I Year = $28900 X 28.58% = $8259.62 or $8260 Dep Exp 2 Year = ($28900 - 8260) X 28.58% = $5898.91 0r $5899 (Approx) Under Units of Activity method of depreciation Dep. Rate per Unit = ($28900 (Cost) - 1410 (Salage Value)) / 114900 Units (Total Units) Dep. Rate per Unit = $0.239252 per Unit or $0.24 per Unit Dep Exp. I Year = 15550 Units X $0.24 = $3732 Dep Exp. 2 Year = 16,240 Units X $0.24 = $3897.60