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Assume Purity Ice Cream Company, Inc., in Ithaca, NY, bought a new ice cream maker at the beginning of the year at a cost of $9,000. The estimated useful life was four years, and the residual value was $1,000. Assume that the estimated productive life of the machine was 16,000 hours. Actual annual usage was 5,500 hours in Year 1; 3,800 hours in Year 2; 3,200 hours in Year 3; and 3,500 hours in Year 4.Required: Complete a separate depreciation schedule for each of the alternative methods. Do not round intermediate calculations a. Straight-line. reciati Book Value At acquisition b. Units-of-production (u four decimal places for the per unit output factor) se Net Depreciation Accumulated Depreciation Book Value Expense At acquisition

User Waffle Paradox
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25 votes

Answer:

Purity Ice Cream Company

a. Depreciation Schedule, using straight-line method:

Cost Depreciation Accumulated Net Book

Expense Depreciation Value

Year 1 $9,000 $2,000 $2,000 $7,000

Year 2 $9,000 $2,000 4,000 5,000

Year 3 $9,000 $2,000 6,000 3,000

Year 4 $9,000 $2,000 8,000 1,000

b. Depreciation Schedule, using unit of production method:

Cost Depreciation Accumulated Net Book

Expense Depreciation Value

Year 1 $9,000 $2,750 $2,750 $6,250

Year 2 $9,000 $1,900 4,650 4,350

Year 3 $9,000 $1,600 6,250 2,750

Year 4 $9,000 $1,750 8,000 1,000

Step-by-step explanation:

a) Data and Calculations:

Cost of ice cream maker = $9,000

Estimated useful life = 4 years

Residual value = $1,000

Depreciable amount = $8,000 ($9,000 - $1,000)

Annual depreciation (Straight-line method) = $2,000 ($8,000/4)

Estimated productive life the machine = 16,000 hours

Annual usage: Depreciation Expense

Year 1 5,500 hours $2,750

Year 2 3,800 hours 1,900

Year 3 3,200 hours 1,600

Year 4 3,500 hours 1,750

Total 16,000 hours $8,000

Depreciation rate per hour = $0.50 ($8,000/16,000)

User David Hansen
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