Question

Assume Organic Ice Cream Company, Inc., bought a new ice cream production kit (pasteurizer/homogenizer, cooler, aging vat, freezer, and filling machine) at the beginning of the year at a cost of $22,000. The estimated useful life was four years, and the residual value was $1,400. Assume that the estimated productive life of the machine was 10,300 hours. Actual annual usage was 4,120 hours in Year 1; 3,090 hours in Year 2; 2,060 hours in Year 3; and 1,030 hours in Year 4. Required: 1. Complete a separate depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance.

Answer 1

Answer:

The machine has a useful life or 4 years and residual value of $1400 so its total The Depreciable Amount is $21,600 (22000-1400)

If we use straight line method depreciation in each year will be 21,600/4=$5400

If we use Units of production method then:

Year 1= 21,600*4120/10300=$8640

Year 2=21600*3090/10300=$6480

Year 3=21600*2060/10300= $4320

Year 4= 21600*1030/10300=$2160

If we use the double-declining method

Rate of Depreciation = 1/4*2=50%

Year = 0.5*21600=$10800

Year 2=0.5*(21600-10800)=$5400

Year 3= 0.5*(10,800-5400)= $2700

Year 4= (5400-2700)= 2700

Explanation: