At the beginning of the year, Palermo Brothers, Inc., purchased a new plastic water bottle making machine at a cost of $45,000. The estimated residual value was $5,000. Assume that the estimated useful life was four years, and the estimated productive life of the machine was 400,000 units. Actual annual production was as follows:
Year Units
1 120000
2 90000
3 110000
4 80000
Required:
Complete a separate depreciation schedule for each of the alternative methods. (Do not round your intermediate calculation.)
a. Double-declining-balance.
b. Units-of-production.
c. Straight-line.

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amcool amcool · Answer 1 · 2021-04-16T04:20:01+02:00

Answer:

See the attached excel file for the depreciation schedule for the three alternative methods.

Explanation:

a. Double-declining-balance.

Note: See part a of the attached excel file for the depreciation schedule for Double-declining-balance method.

In the attached excel file, the depreciation rate used for the Double-declining-balance method is calculated as follows:

Straight line depreciation rate = 1 / Estimated useful life = 1 / 4 = 0.25, or 25%

Double-declining depreciation rate = Straight line depreciation rate * 2 = 25% * 2 = 50%

b. Units-of-production.

Note: See part b of the attached excel file for the depreciation schedule for Units-of-production method.

c. Straight-line.

Note: See part b of the attached excel file for the depreciation schedule for Straight-line method.

In the attached excel file, the depreciation rate used for the Straight-line method is calculated as follows:

Straight line depreciation rate = 1 / Estimated useful life = 1 / 4 = 0.25, or 25%