ABC Company acquired a machine for $50,000 on January 1, 20X1. The machine has an estimated useful life of 5 years and an estimated salvage value of $5,000. ABC Company used the machine as follows: ● Year 20X1: The machine was used for 1,000 hours Year 20X2: The machine was used for 1,500 hours Year 20X3: The machine was used for 2,000 hours Year 20X4: The machine was used for 1,500 hours Year 20X5: The machine was used for 1,000 hours 1: Compute the depreciation expense for each year using the following methods: a) Straight-line depreciation b) Double-declining balance depreciation c) Units of production depreciation
ABC Company acquired a machine for $50,000 on January 1, 20X1. The machine has an estimated useful life of 5 years and an estimated salvage value of $5,000. ABC Company used the machine as follows: ● Year 20X1: The machine was used for 1,000 hours Year 20X2: The machine was used for 1,500 hours Year 20X3: The machine was used for 2,000 hours Year 20X4: The machine was used for 1,500 hours Year 20X5: The machine was used for 1,000 hours 1: Compute the depreciation expense for each year using the following methods: a) Straight-line depreciation b) Double-declining balance depreciation c) Units of production depreciation
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Part 2:
ABC Company acquired a machine for $50,000 on January 1, 20X1. The machine has an
estimated useful life of 5 years and an estimated salvage value of $5,000. ABC Company
used the machine as follows:
●
Year 20X1: The machine was used for 1,000 hours
Year 20X2: The machine was used for 1,500 hours
Year 20X3: The machine was used for 2,000 hours
Year 20X4: The machine was used for 1,500 hours
Year 20X5: The machine was used for 1,000 hours
1: Compute the depreciation expense for each year using the following methods:
a) Straight-line depreciation
b) Double-declining balance depreciation
c) Units of production depreciation
2: Which depreciation method yields the highest depreciation expense in the first year?
Which method yields the highest depreciation expense over the entire useful life of the
machine?
Note: You may assume that the machine is the only asset that ABC Company owns and
that it is not subject to any salvage value limitations or minimum usage requirements.
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