Question

Duluth Ranch, Inc. purchased a machine on January 1, 2018. The cost of the machine was $21,500. Its estimated residual value was $6,500 at the end of an estimated 5-year life. The company expects to produce a total of 10,000 units. The company produced 850 units in 2018 and 1,300 units in 2019. Required: Calculate depreciation expense for 2018 and 2019 using the straight-line method. Calculate the depreciation expense for 2018 and 2019 using the units-of-production method. Calculate depreciation expense for 2018 through 2022 using the double-declining balance method.

Answer 1

Step-by-step explanation:

Cost of acquisition - $21,500

Residual value - $6,500

Depreciable amount - 21500-6500 =15,000

Useful life = 5 years

Total units produced = 10000

Depreciation rate = 1/5*100 = 20%

Double depreciation raate = 40%

Depreciation 2018 2019

Straight line 20%*15000 3000 3000

Units of production

850/10000*15000 1275

1300/10000*15000 1950

Double declining balance method

2018 = 40%*21500 = 8600

2019 =(21500-8600) *40%= 5160

2020 (12900 -5160)*40% = 3096

2021 (7740-3096) *40% =1858

2022 (4644-1858)*40% = 1114