Answer:
Organic Ice Cream Company, Inc.
Depreciation Schedules:
a. Straight-line.
Year Cost Depreciation Accumulated Net book Value
Depreciation
Year 1 $14,000 $3,255 $3,255 $10,745
Year 2 $14,000 $3,255 $6,510 $7,490
Year 3 $14,000 $3,255 $9,765 $4,235
Year 4 $14,000 $3,255 $13,020 $980
b. Units-of-production.
Year Cost Depreciation Accumulated Net book Value
Depreciation
Year 1 $14,000 $5,208 $5,208 $8,792
Year 2 $14,000 $3,906 $9,114 $4,886
Year 3 $14,000 $2,604 $11,718 $2,282
Year 4 $14,000 $1,302 $13,020 $980
c. Double-declining-balance.
Year Cost Depreciation Accumulated Net book Value
Depreciation
Year 1 $14,000 $7,000 $7,000 $7,000
Year 2 $14,000 $3,500 $10,500 $3,500
Year 3 $14,000 $1,750 $12,250 $1,750
Year 4 $14,000 $770 $13,020 $980
Explanation:
a) Data and Calculations:
Cost of new ice cream production kit = $14,000
Residual value = $980
Depreciable value = $13,020
Estimated useful life = 4 years
Annual depreciation expense under straight-line method = $3,255 ($13,020/4)
Estimated productive life of the machine = 9,300 hours
Units-of-productive hours depreciation method per hour = $1.40 ($13,020/9,300)
Year 1 3,720 hours * $1.40 = $5,208
Year 2 2,790 hours * $1.40 = $3,906
Year 3 1,860 hours * $1.40 = $2,604
Year 4 930 hours* $1.40 = $1,302
Double-declining-balance method:
Depreciation rate = 100/4 * 2 = 50%
Year 1 = $14,000 * 50% = $7,000
Year 2 = $7,000 * 50% = $3,500
Year 3 = $3,500 * 50% = $1,750
Year 4 = $770 ($1,750 - $980)
