Question

Pan Corporation is a company that manufactures and sells baking forms. On 1/1/20, the company purchases a piece of manufacturing equipment for $2,500,000 cash. The expected residual value is $260,000 and the useful life is 5 years. The company expects to produce 8,000,000 forms with the equipment – 2,500,000 forms in 2020; 2,000,000 forms in 2021; 1,500,000 forms in 2022; 800,000 forms in 2023, and 1,200,000 forms in 2024.

Required:
Use the Straight-Line method to find depreciation from 2020 to 2024

Answer 1

2020 $700,000

2021 $560,000

2022 $420,000

2023 $224,000

2024 $336,000

Step-by-step explanation:

Depreciation charge=cost-residual value*number of forms produced in the year/total expected forms.

2020 depreciation=($2,500,0000-$260,000)*2,500,000/8,000,000=$700,000

2021 depreciation=($2,500,0000-$260,000)*2,000,000/8,000,000=$560000

2022 depreciation=($2,500,0000-$260,000)*1,500,000/8,000,000=$420000

2023 depreciation=($2,500,0000-$260,000)*800,000/8,000,000=$224000

2024 depreciation=($2,500,0000-$260,000)*1200,000/8,000,000=$336000