Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to thewellness programs at NGS. The machine was purchased at the beginning of year at acost of $7,000. The estimated useful life was five years and the residual value was $50o.Assume that the estimated productive life of the machine is 13,000 hours. Expectedannual production was year 1, 3,100 hours; year 2, 2,500 hours; year 3, 3,400 hours; year4, 2,200 hours; and year 5, 1,800 hours.Required:1. Complete a depreciation schedule for each of the alternative methods. (Do not roundintermediate calculations. Round your final answers to the nearest dollar amount.)a. Straight-line.Depreciation AccumulatedExpenseYearBook ValueDepreciationAt AcquisitionYear 1Year 2Year 3Year 4Year 5 b. Units-of-production.DepreciationExpenseAccumulatedYearBook ValueDepreciationAt AcquisitionYear 1Year 2Year 3Year 4Year 5c. Double-declining-balance.DepreciationExpenseAccumulatedYearBook ValueDepreciationAt AcquisitionYear 1Year 2Year 3Year 4Year 5

Depreciation is the method of accounting which is used for allocating the cost of the physical or the tangible asset over the expected or the useful life of the asset. In short, it states how much of value of asset have been used up. 1. a. Straight line method as: The formula is as: Depreciation expense = Cost of asset - Residual valueUseful life of asset=$7,000 - $5005=$1,300 Year Depreciation expense Accumulated depreciation (A) Book Value ($7,000 - A) At acquisition $7,000 Year 1 $1,300 $1,300 $5,700 Year 2 $1,300 $2,600 $4,400 Year 3 $1,300 $3,900 $3,100 Year 4 $1,300 $5,200 $1,800 Year 5 $1,300 $6,500 $500 b. Using Unit of production methods: Depreciation expense = Cost - Salvage valueTotal units of production ×Number of units produced in the period Year Depreciation expense Accumulated depreciation (A) Book Value ($7,000 - A) At acquisition $7,000 Year 1 $1,550 $1,550 $5,450 Year 2 $1,250 $2,800 $4,200 Year 3 $1,700 $4,500 $2,500 Year 4 $1,100 $5,600 $1,400 Year 5 $900 $6,500 $500 Working: Depreciation expense as: For year 1 =$7,000 - $50013,000×3,100=$1,550 For year 2 =$7,000 - $50013,000×2,500=$1,250 For year 3 =$7,000 - $50013,000×3,400=$1,700 For year 4 =$7,000 - $50013,000×2,200=$1,100 For year 5 =$7,000 - $50013,000×1,800=$900 c. Using diminishing balance method as: Depreciation expense =Cost of asset ×Rate of depreciation100 where Rate of depreciation =2× 100%Useful life of asset =2×100%5=40% Year Depreciation expense Accumulated depreciation (A) Book Value ($7,000 - A) At acquisition $7,000 Year 1 $2,800 $2,800 $4,200 Year 2 $1,680 $4,480 $2,520 Year 3 $1,008 $5,488 $1,512 Year 4 $605 $6,093 $907 Year 5 $407 $6,500 $500 Working: Depreciation expense as: Year 1 = $7,000 ×40100=$2,800 Year 2 = ($7,000 - $2,800) ×40100=$1,680 Year 3 = ($7,000 - $4,480) ×40100=$1,008 Year 4= ($7,000 - $5,488) ×40100=$605 Year 5 = ($7,000 - $6,093) ×40100=$407

Business

Accounting

Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of year at a cost of $7,000. The estimated useful life was five years and the residual value was $500. Assume that the estimated productive life of the machine is 13,000 hours. Expected annual production was year 1, 3,100 hours; year 2, 2,500 hours; year 3, 3,400 hours; year 4, 2,200 hours; and year 5, 1,800 hours. quired: Complete a depreciation schedule for each of the alternative methods. (Do not round ntermediate calculations. Round your final answers to the nearest dollar amount.) Straigkt-line

Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of year at a cost of $7,000. The estimated useful life was five years and the residual value was $500. Assume that the estimated productive life of the machine is 13,000 hours. Expected annual production was year 1, 3,100 hours; year 2, 2,500 hours; year 3, 3,400 hours; year 4, 2,200 hours; and year 5, 1,800 hours. quired: Complete a depreciation schedule for each of the alternative methods. (Do not round ntermediate calculations. Round your final answers to the nearest dollar amount.) Straigkt-line

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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