Question

Exact Photo Service purchased a new color printer at the beginning of Year 1 for $38,000. The printer is expected to have a four-year useful life and a $3,500 salvage value. The expected print production is estimated at 1,500,000 pages. Actual print production for the four years was as follows: 2016:390,000 2017:410,000 2018:420,000 2019:300,000Total:1,520,000The printer was sold at the end of 2019 for $1,650.A.Compute the depreciation expense for each of the four years, using double-declining-balance depreciation.2016:2017:2018:2019:Total accumlated depreciated:B.Compute the depreciation expense for each of the four years, using units-of-production depreciation.2016:2017:2018:2019:Total accumlated depreciated:C.Calculate the amount of gain or loss from the sale of the asset under each of the depreciation methods.DDB:Units-of-production

Answer 1

Answer:

A. depreciation expenses  for each under Double declining method

2016 = $19,000

2017 = $9500

2018= $4750

2019=  $2,375

Total Accumulated Depreciation = $35,625

Gain on sales of the asset  = salvage value + accumulated dpereciation - cost  

      =   $3,500 + $35,625 - $38,000 =  $1,125

b. depreciation expenses using unit of production

2016 =  $8,970

2017 = $9,430

2018 = $9,660

2019 = $6,900

total accumulated depreciation = $34,960

Gain on the sale of the asset  = $3500 + $34,690 - 38,000 = $460

Explanation:

a. Computataion of depreciation expenses uing Double - declining method

annual depreciation  =   cost  minus Accumulated Depreciation x 2/life span

2016  =  $38,000 * 2/4 =  $19,000

2017   =  ( $38,000 - 19,000) * 2/4 =  $9,500

2018  = ( $38,000 - 28,500) * 2/4   = $4,750

2019  =  ($38,000 - 33,250) * 2/4 =   $2,375

b. computation of depreciation expenses using unit of production

Depreciation per unit  =  (Cost - Salvage value ) * 1/ life unit

                                    = ( $38,000 - 3,500)/1,520,000 =  $0.023

depreciation for each year

2016  = $0,023 * 390,000 =  $8,970

2017 = $0.023 * 410,000 =  $9,430

2018 = $0.023 * 420,000 =  $9660

2019 = $0.023 * 300,000 =  $6,900

Answer 2

Answer:

Double declining

$\left[\begin{array}{ccccc}Year&Beginning&Dep-Expense&Acc. \: Dep&Ending\\0&-&-&-&38000\\1&38000&19000&19000&19000\\2&19000&9500&28500&9500\\3&9500&4750&33250&4750\\4&4750&1250&34500&3500\\\end{array}\right]$

$\left[\begin{array}{cccccc}year&activity&cost& dep exp& acc dep& net book value\\&&&&38000\\1&390000&0.022697&8851.83&8851.83&29148.17\\2&410000&0.022697&9305.77&18157.6&19842.4\\3&420000&0.022697&9532.74&27690.34&10309.66\\4&300000&0.022697&6809.1&34499.44&3500.56\\\end{array}\right]$

journal entry:

acc dep Equip 34,500 debit

cash                     1,650 debit

loss on disposal  1,850 debit

                                    equipment 38,000 credit

Explanation:

double declining rate:

2 /4 years of useful life = 0.5

Each year we multply the carrying value times the declining rate but last year, we adjust only to get the salvage value.

units of production

38,000 - 3,500 = 34500 amount subject dto depreciation

34,500 / 1,520,000 expected units-of-output = 0.022 rate per unit

we multiply the output by the activity level of each year

Sales gain or loss:

asunder both method is being sold at the end of the useful life it will be the same for each method

we compare the 3,500 ssalvage value against the 1,650 received and get a loss for 1,850

acc dep Equip 34,500 debit

cash                     1,650 debit

loss on disposal  1,850 debit

                                    equipment 38,000 credit