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2 years ago

Depreciation by Three Methods; Partial Years

Business

1 answer:

Daniel [21]2 years ago

6 0

Answer:

a. Straight-line method.

Year Depreciation expense ($)

1 10,530

2 14,040

3 14,040

4 3,510

b. Units-of-production method.

Year Depreciation expense ($)

1 7,800

2 14,950

3 12,350

4 7,020

c. Double-declining balance method

Year Depreciation expense ($)

1 21,735

2 14,490

3 4,830

4 1,065

Explanation:

(a) the straight-line method

Note: See part a of the attached excel file for the depreciation schedule for Straight-line method.

In the attached excel file, the depreciation rate used for the Straight-line method is calculated as follows:

Straight line depreciation rate = 1 / Estimated useful life = 1 / 3 = 0.3333, or 33.33%

(b) units-of-output method

Note: See part b of the attached excel file for the depreciation schedule for units-of-production method.

(c) the double-declining-balance method.

Note: See part c of the attached excel file for the depreciation schedule for double-declining-balance method.

In the attached excel file, the depreciation rate used for the Double- declining-balance method is calculated as follows:

Double-declining depreciation rate = Straight line depreciation rate * 2 = (1/3) * 2 = 0.666667, or 66.6667%

Note:

Under this double-declining-balance method, the depreciation expenses for Year 4 is calculated by deducting the residual value of $1,350 from the Year 4 Beginning depreciable amount (i.e. $2,415 - $1,350 = $1,065). The residual value of $1,350 therefore represents the book value at the end of Year 4.

Download xlsx

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Answer:

Primera Company

1. Plantwide predetermined overhead rate:

= $1,536,000/768,000

= $2.00 per direct labor hour

Overhead assigned to each product:

Product 1 Product 2

Direct labor hours 480,000 147,200

Predetermined overhead

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Total overhead = $960,000 $294,400

2. Predetermined departmental overhead rates:

Department 1:

Direct labor hours $2 ($1,536,000/768,000)

Department 2

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Overhead assigned:

Product 1 = $960,000 (480,000 * $2)

Product 2 = $70,896 (9,600 * $7.385)

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Department 2 = $1,512,448 (204,800 * $7.385)

Total = $2,766,848

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Credit Cost of goods sold $1,134,848

To transfer the overapplied overhead to cost of goods sold.

Additional information needed if the variance is material is to determine the percentages to allocated to Work in process, Finished Goods, and Cost of Goods Sold.

Explanation:

a) Data and Calculations:

Estimates:

Department 1 Department 2 Total

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Machine hours 16,000 192,000 208,000

Overhead cost $384,000 $1,152,000 $1,536,000

Actual results:

Department 1 Department 2 Total

Direct labor hours 627,200 134,400 761,600

Machine hours 17,600 204,800 222,400

Overhead cost $400,000 $1,232,000 $1,632,000

Product 1 Product 2 Total

Direct labor hours:

Department 1 480,000 147,200 627,200

Department 2 96,000 38,400 134,400

Machine hours:

Department 1 8,000 9,600 17,600

Department 2 24,800 180,000 204,800

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Answer:

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