Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $30,000. The estimated useful life was five years and the residual value was $3,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production was year 1, 1,900 units; year 2, 2,900 units; year 3, 1,900 units; year 4, 1,900 units; and year 5, 1,400 units. Required: 1. Complete a depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance. 2. Which method will result in the highest net income in year 2?
Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $30,000. The estimated useful life was five years and the residual value was $3,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production was year 1, 1,900 units; year 2, 2,900 units; year 3, 1,900 units; year 4, 1,900 units; and year 5, 1,400 units. Required: 1. Complete a depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance. 2. Which method will result in the highest net income in year 2?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:Solar Innovations Corporation
bought a machine at the
beginning of the year at a cost of
$30,000. The estimated useful life
was five years and the residual
value was $3,000. Assume that
the estimated productive life of
the machine is 10,000 units.
Expected annual production was
year 1, 1,900 units; year 2, 2,900
units; year 3, 1,900 units; year 4,
1,900 units; and year 5, 1,400
units.
Required:
1. Complete a depreciation
schedule for each of the
alternative methods.
a. Straight-line.
b. Units-of-production.
c. Double-declining-balance.
2. Which method will result in the
highest net income in year 2?
Does this higher net income mean
the machine was used more
efficiently under this depreciation
method?
Transcribed Image Text:Complete a depreciation schedule for Straight-nomothad. Do not round intermediate calculations)
Ba
Accu
Your
1
2
3
4
6
A
1. Complete a depreciation schedule for each of the leative methods
Units of production
Double-decking-ce
2 which method will result in the highest net income in year 2? Does this higher net Income mean the machine was used more
efficiently under this depreciation method
Complete this question by entering your answers in the tabs below.
Year
Pe 1A
Pic 18
24 Pet 28
Complete a depreciation schedule for Units of production method. (Do not round intermediate calculation)
Balance Sheet
Ak
1
2
3
4
S
Sement
Depreca
Year
Cost
Ma
Deprecubes
Requires
1 Complete a depreciation schedule for each of the alternative methods.
Straight line
b. Units of production.
Double dedining belance
1
2 Which method will result in the highest ret income in year 2? Does this higher net income mean the machine was used m
efficiently under this depreciation method
2
3
4
RIC
Complete this question by entering your answers in the tabs below.
$
Book
Complete a depreciation schedule for Double-decining-balince method. [Do not round intermediate calculations. Round final
arvers to the nearest whole dollars.)
Cast
Income
Depreciation
Exper
Cost
Balance Sheet
Accurated Book
Depreciation
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