Question

Assume Purity Ice Cream Company, Inc., in Ithaca, NY, 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 $152,000. The estimated useful life was four years, and the residual value was $8,000. Assume that the estimated productive life of the machine was 16,000 hours. Actual annual usage was 5,500 hours in Year 1; 3,800 hours in Year 2; 3,200 hours in Year 3; and 3,500 hours in Year 4.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Assume Purity Ice Cream Company, Inc., in Ithaca, NY, bought a new ice cream production kit at the beginning of the year for $152,000. The estimated useful life was four years, and the residual value was $8,000. Assume that the estimated productive life of the machine was 16,000 hours. Actual annual usage was 5,500 hours in Year 1; 3,800 hours in Year 2; 3,200 hours in Year 3; and 3,500 hours in Year 4.

Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced

Year 1= [(152,000 - 8,000)/16,000]*5500= 49,500

Year 2= 9*3,800= 34,200

Year 3= 3,200*9= 28,800

Year 4= 9*3,500= 31,500

Total 144,000