Chapter 11, Problem 11.3DMP

Judgment Case 11–3

Straight-line method; composite depreciation

• LO11–1, LO11–2

Portland Co. uses the straight-line depreciation method for depreciable assets. All assets are depreciated individually except manufacturing machinery, which is depreciated by the composite method.

Required:

1. What factors should have influenced Portland’s selection of the straight-line depreciation method?

2. a. What benefits should derive from using the composite method rather than the individual basis for manufacturing machinery?

b. How should Portland have calculated the manufacturing machinery’s annual depreciation in its first year of operation?

(AICPA adapted)