Question

Depreciation Methods Clearcopy, a printing company, acquired a new press on January 1, 2019. The press cost $173,400 and had an expected life of 8 years or 4,500,000 pages and an expected residual value of $15,000. Clearcopy printed 675,000 pages in 2019. Required: 1. Compute 2019 depreciation expense using the: 2019 a. Straight-line method $ b. Double-declining-balance method $ c. Units-of-production method $ 2. What is the book value of the machine at the end of 2019 under each method

Answer 1

The computations are shown below:

Step-by-step explanation:

The computations are shown below:

1. a) Straight-line method:

= (Original cost - expected residual value) ÷ (expected life)

= ($173,400 - $15,000) ÷ (8 years)

= (158,400) ÷ (8 years)

= $19,800

In this method, the depreciation is same for all the remaining useful life

(b) Double-declining balance method:

First we have to find the depreciation rate which is shown below:

= One ÷ useful life

= 1 ÷ 8

= 12.5%

Now the rate is double So, 25%

In year 1, the original cost is $173,400 so the depreciation is $43,350 after applying the 25% depreciation rate

(c) Units-of-production method:

= (Original cost - residual value) ÷ (estimated production)

= ($173,400 - $15,000 ) ÷ ($4,500,000 pages)

= ($158,400) ÷ ($4,500,000 pages)

= $0.0352

Now for the first year, it would be

= Production pages in first year × depreciation per page

= 675,000 pages × $0.0352

= $23,760

2. The book values are as follows

As we know that

Book value = Purchase cost - accumulated depreciation

a) Straight-line method:

= $173,400 - $19,800

= $153,600

(b) Double-declining balance method:

= $173,400 - $43,350

= $130,050

(c) Units-of-production method:

= $173,400 - $23,760

= $149,640

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