Question

Shining Cookie Company, Inc., in Murfreesboro, TN bought a new ice cream maker at the beginning of the year at a cost of $12,000. The estimated useful life was four years, and the residual value was $960. Assume that the estimated productive life of the machine was 9,200 hours. Actual annual usage was 3,680 hours in year 1; 2,760 hours in year 2; 1,840 hours in year 3; and 920 hours in year 4.

Required:
1. Complete a separate depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.)
a. Straight-line.
b. Units-of-production (use four decimal places for the per unit output factor).
c. Double-declining-balance.

Answer 1

a. Straight Line :

Year 1 : $2760

Year 2 : $2760

Year 3 : $2760

Year 4 : $2760

b. Units of production :

Year 1 : $4416

Year 2 : $3312

Year 3 : $2208

Year 4 : $1104

a. Double Declining Balance :

Year 1 : $6000

Year 2 : $3000

Year 3 : $1500

Year 4 : $560

Step-by-step explanation:

a. Straight Line Depreciation:

( Cost of Ice cream maker - Residual Value ) / Useful life in years

( $12,000 - $960 ) / 4 = $2760

b. Units of production :

( Cost of Ice cream maker / Total Productive machine hours ) * Annual Usage

Year 1 ($12,000 / 9200 ) * 3680 = 4416

Year 2 ($12,000 / 9200 ) * 2760 = 3312

Year 3 ($12,000 / 9200 ) * 1840 = 2208

Year 4 ($12,000 / 9200 ) * 920 = 1104

c. Double declining method :

Year 1: $12,000 * 50% = $6000

Year 2 : $12,000 * 25% = $3000

Year 3 : $12,000 * 12.5% = $1500

Year 4 : $12,000 * 6.25% = $560