-Use the following information to calculate depreciation under the 3 separate methods. y also estimates it will use the machine for four years or about 8,000 total hours. tallation. The company estimates the equipment will have a residual value of $35,000. Cheetah uny Durchased a new copy machine. The new machine cost $140,000 including etah Copy . Calculate the annual depreciation expense using straight-line depreciation. 2. Prepare the depreciation schedule using double declining depreciation. Year Beginning book value Depreciation Depreciation Accumulated Ending book rate expense depreciation 1 value 3. Prepare the depreciation schedule using activity-based depreciation. Depreciation Depreciation Accumulated depreciation Ending book value Year Hours used rate expense 1. 3,000 2,000 3. 2,000 4 2,000

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Chapter1: Financial Statements And Business Decisions
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Use the following information to calculate depreciation under the 3 separate methods.

Cheetah Copy purchased a new copy machine. The new machine cost $140,000 including installation. The company estimates the equipment will have a residual value of $35,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours.

1. Calculate the annual depreciation expense using straight-line depreciation.

2. Prepare the depreciation schedule using double declining depreciation.

| Year | Beginning book value | Depreciation rate | Depreciation expense | Accumulated depreciation | Ending book value |
|------|----------------------|-------------------|----------------------|--------------------------|-------------------|
| 1    |                      |                   |                      |                          |                   |
| 2    |                      |                   |                      |                          |                   |
| 3    |                      |                   |                      |                          |                   |
| 4    |                      |                   |                      |                          |                   |

3. Prepare the depreciation schedule using activity-based depreciation.

| Year | Hours used | Depreciation rate | Depreciation expense | Accumulated depreciation | Ending book value |
|------|------------|-------------------|----------------------|--------------------------|-------------------|
| 1    | 3,000      |                   |                      |                          |                   |
| 2    | 2,000      |                   |                      |                          |                   |
| 3    | 2,000      |                   |                      |                          |                   |
| 4    | 2,000      |                   |                      |                          |                   |

---

**Notes:**

- **Straight-Line Depreciation**: This method allocates an equal depreciation expense each year over the asset's useful life.
- **Double Declining Depreciation**: This accelerated method calculates depreciation at twice the straight-line rate, leading to higher expenses in the early years.
- **Activity-Based Depreciation**: Depreciation is based on the usage of the asset (e.g., hours of operation), providing flexibility based on actual usage.

Made by Dr. Baaske – Do not share.
Transcribed Image Text:Use the following information to calculate depreciation under the 3 separate methods. Cheetah Copy purchased a new copy machine. The new machine cost $140,000 including installation. The company estimates the equipment will have a residual value of $35,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. 1. Calculate the annual depreciation expense using straight-line depreciation. 2. Prepare the depreciation schedule using double declining depreciation. | Year | Beginning book value | Depreciation rate | Depreciation expense | Accumulated depreciation | Ending book value | |------|----------------------|-------------------|----------------------|--------------------------|-------------------| | 1 | | | | | | | 2 | | | | | | | 3 | | | | | | | 4 | | | | | | 3. Prepare the depreciation schedule using activity-based depreciation. | Year | Hours used | Depreciation rate | Depreciation expense | Accumulated depreciation | Ending book value | |------|------------|-------------------|----------------------|--------------------------|-------------------| | 1 | 3,000 | | | | | | 2 | 2,000 | | | | | | 3 | 2,000 | | | | | | 4 | 2,000 | | | | | --- **Notes:** - **Straight-Line Depreciation**: This method allocates an equal depreciation expense each year over the asset's useful life. - **Double Declining Depreciation**: This accelerated method calculates depreciation at twice the straight-line rate, leading to higher expenses in the early years. - **Activity-Based Depreciation**: Depreciation is based on the usage of the asset (e.g., hours of operation), providing flexibility based on actual usage. Made by Dr. Baaske – Do not share.
Expert Solution
Step 1 explaination

Under straight line method we calculate depreciation by following formula = Cost of Machine - Residual vale / No of years Used.

Under double decling method, we will firslty calculate the rate of depreciation and then double it then use it for yealy depreciation.

Under the activity based depreciation method we will calculate the depreciation on the basis of activity done.

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