Banko Incorporated manufactures sporting goods. The following information applies to a machine purchased on January 1, Year 1: Purchase price Delivery cost Installation charge Estimated life Estimated units. Salvage estimate 160,000 $ 3,000 During Year 1, the machine produced 56,000 units, and during Year 2 it produced 58,000 units. Required: a. Determine the amount of depreciation expense for Year 1 and Year 2 using straight-line method. b. Determine the amount of depreciation expense for Year 1 and Year 2 using double-declining-balance method. c. Determine the amount of depreciation expense for Year 1 and Year 2 using units of production method. d. Determine the amount of depreciation expense for Year 1 and Year 2 using MACRS, assuming that the machine is classified as seven-year property. Note: Round your answers to the nearest dollar amount. MACRS table: Year 1 2 3 4 5 6 7 8 5-Year property, 20.00 32.00 19.20 11.52 11.52 5.76 a. Depreciation expense b. Depreciation expense c. Depreciation expense d. Depreciation expense $ 91,000 $ 5,000 $ 3,000 7-Year property, 14.29 24.49 17.49 12.49 8.93 8.92 8.93 4.46 Year 1 5 years Year 2
Banko Incorporated manufactures sporting goods. The following information applies to a machine purchased on January 1, Year 1: Purchase price Delivery cost Installation charge Estimated life Estimated units. Salvage estimate 160,000 $ 3,000 During Year 1, the machine produced 56,000 units, and during Year 2 it produced 58,000 units. Required: a. Determine the amount of depreciation expense for Year 1 and Year 2 using straight-line method. b. Determine the amount of depreciation expense for Year 1 and Year 2 using double-declining-balance method. c. Determine the amount of depreciation expense for Year 1 and Year 2 using units of production method. d. Determine the amount of depreciation expense for Year 1 and Year 2 using MACRS, assuming that the machine is classified as seven-year property. Note: Round your answers to the nearest dollar amount. MACRS table: Year 1 2 3 4 5 6 7 8 5-Year property, 20.00 32.00 19.20 11.52 11.52 5.76 a. Depreciation expense b. Depreciation expense c. Depreciation expense d. Depreciation expense $ 91,000 $ 5,000 $ 3,000 7-Year property, 14.29 24.49 17.49 12.49 8.93 8.92 8.93 4.46 Year 1 5 years Year 2
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Banko Incorporated manufactures sporting goods. The following information applies to a machine purchased on January 1, Year 1:
$ 91,000
$5,000
$ 3,000
Purchase price
Delivery cost
Installation charge
Estimated life
Estimated units.
Salvage estimate
160,000
$3,000
During Year 1, the machine produced 56,000 units, and during Year 2 it produced 58,000 units.
Required:
a. Determine the amount of depreciation expense for Year 1 and Year 2 using straight-line method.
b. Determine the amount of depreciation expense for Year 1 and Year 2 using double-declining-balance method.
c. Determine the amount of depreciation expense for Year 1 and Year 2 using units of production method.
d. Determine the amount of depreciation expense for Year 1 and Year 2 using MACRS, assuming that the machine is classified as
seven-year property.
Note: Round your answers to the nearest dollar amount.
MACRS table:
Year
1
2
3
4
5
6
7
8
5-Year
property, &
20.00
32.00
19.20
11.52
11.52
5.76
a. Depreciation expense
b. Depreciation expense
c. Depreciation expense
d. Depreciation expense
7-Year
property, &
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
5 years
Year 1
Year 2
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