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Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. Determine the machine's second-year depreciation using the double-declining-balance method. Double-declining-balance Depreciation Annual Depreciation Expense Depreciation expense Choose Factors: Choose Factor(%) First year's depreciation Second year's depreciation

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. Determine the machine's second-year depreciation using the double-declining-balance method. Double-declining-balance Depreciation Annual Depreciation Expense Depreciation expense Choose Factors: Choose Factor(%) First year's depreciation Second year's depreciation

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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### Depreciation Calculation Using Double-Declining-Balance Method **Scenario:** Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. **Objective:** Determine the machine's second-year depreciation using the double-declining-balance method. **Table: Double-Declining-Balance Depreciation** | | | | | | |-----------------------------------------|------------------------------------|----------------|---------------------------------------|----------------------------------------| | **Factor** | **Choose Factors:** | **x** | **Choose Factor (%)** | **= Annual Depreciation Expense** | | **First year's depreciation** | | x | | = Depreciation expense | | **Second year's depreciation** | | x | | = | ### Explanation of Table Components: 1. **Choose Factors:** - This column indicates the selection of relevant factors for the double-declining-balance depreciation calculation. 2. **x:** - This represents the multiplication operation between the chosen factors. 3. **Choose Factor (%):** - Indicates the percentage factor used in the double-declining calculation. 4. **Annual Depreciation Expense:** - This will show the resulting annual depreciation expense for both the first and second years based on the provided factors and the double-declining-balance method. ### Steps to Determine Depreciation: 1. **Determine the rate:** - The straight-line depreciation rate is \( \frac{1}{20} = 0.05 \). - The double-declining balance rate is \( 0.05 \times 2 = 0.10 \) or 10%. 2. **First Year's Depreciation:** - Depreciation Expense = Book Value at Beginning of Year × Double-Declining Rate - First Year's Depreciation = $83,600 × 0.10 = $8,360. 3. **Second Year's Depreciation:** - The book value at the beginning of the second year = $83,600 - $8,360 = $75,240
Transcribed Image Text:### Depreciation Calculation Using Double-Declining-Balance Method **Scenario:** Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product. **Objective:** Determine the machine's second-year depreciation using the double-declining-balance method. **Table: Double-Declining-Balance Depreciation** | | | | | | |-----------------------------------------|------------------------------------|----------------|---------------------------------------|----------------------------------------| | **Factor** | **Choose Factors:** | **x** | **Choose Factor (%)** | **= Annual Depreciation Expense** | | **First year's depreciation** | | x | | = Depreciation expense | | **Second year's depreciation** | | x | | = | ### Explanation of Table Components: 1. **Choose Factors:** - This column indicates the selection of relevant factors for the double-declining-balance depreciation calculation. 2. **x:** - This represents the multiplication operation between the chosen factors. 3. **Choose Factor (%):** - Indicates the percentage factor used in the double-declining calculation. 4. **Annual Depreciation Expense:** - This will show the resulting annual depreciation expense for both the first and second years based on the provided factors and the double-declining-balance method. ### Steps to Determine Depreciation: 1. **Determine the rate:** - The straight-line depreciation rate is \( \frac{1}{20} = 0.05 \). - The double-declining balance rate is \( 0.05 \times 2 = 0.10 \) or 10%. 2. **First Year's Depreciation:** - Depreciation Expense = Book Value at Beginning of Year × Double-Declining Rate - First Year's Depreciation = $83,600 × 0.10 = $8,360. 3. **Second Year's Depreciation:** - The book value at the beginning of the second year = $83,600 - $8,360 = $75,240
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