Chap008wildtextbook

# 9,000 45,000 5,000 45,000 \$ 45,000 \$ salvage value

This preview shows pages 12–24. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 9,000 45,000 5,000 45,000 \$ 45,000 \$ Salvage Value Straight-Line Method Depreciation Rate = (100% Ã· 5 years) = 20% per year 8-12 Units-of-Production Method Step 2: Depreciation Expense = Depreciation Per Unit Ã— Number of Units Produced in the Period Depreciation Per Unit = Cost - Salvage Value Total Units of Production Step 1: 8-13 On December 31, 2011, equipment was purchased for \$50,000 cash. The equipment is expected to produce 100,000 units during its useful life and has an estimated salvage value of \$5,000. Units-of-Production Method 8-14 If 22,000 units were produced in 2011, what is the amount of depreciation expense? Step 2: Depreciation Expense = \$.45 per unit Ã— 22,000 units = \$9,900 Step 1: Depreciation Per Unit = \$50,000 - \$5,000 100,000 units = \$.45 per unit Units-of-Production Method 8-15 Depreciation Accumulated Book Year Units Expense Depreciation Value 50,000 \$ 2011 22,000 9,900 \$ 9,900 \$ 40,100 2012 28,000 12,600 22,500 27,500 2013-- 22,500 27,500 2014 32,000 14,400 36,900 13,100 2015 18,000 8,100 45,000 5,000 100,000 45,000 \$ No depreciation expense if the equipment is idle. Units-of-Production Method 8-16 Depreciation Expense Early Years High Later Years Low Declining Balance Method 8-17 Double-Declining-Balance Method Step 2: Double-declining- balance rate = 2 Ã— Straight-line rate = 2 Ã— 20% = 40% Step 1: Straight-line rate = 100 % Ã· Useful life = 100% Ã· 5 = 20% Step 3: Depreciation expense = Double-declining- balance rate Ã— Beginning period book value 40% Ã— \$50,000 = \$20,000 for 2011 8-18 2011 Depreciation: 40% Ã— \$50,000 = \$20,000 Double-Declining-Balance Method 2012 Depreciation: 40% Ã— (\$50,000 - \$20,000 ) = \$12,000 8-19 Depreciation Accumulated Book Year Expense Depreciation Value 50,000 \$ 2011 20,000 \$ 20,000 \$ 30,000 2012 12,000 32,000 18,000 2013 7,200 39,200 10,800 2014 4,320 43,520 6,480 2015 2,592 46,112 3,888 46,112 \$ Below salvage value Double-Declining-Balance Method 8-20 Depreciation Accumulated Book Year Expense Depreciation Value 50,000 \$ 2011 20,000 \$ 20,000 \$ 30,000 2012 12,000 32,000 18,000 2013 7,200 39,200 10,800 2014 4,320 43,520 6,480 2015 1,480 45,000 5,000 45,000 \$ We usually must force depreciation expense in the last year so that book value equals salvage value . Double-Declining-Balance Method 8-21 Comparing Depreciation Methods Annual Production Depreciation Life in Years \$0 \$2,000 \$4,000 \$6,000 \$8,000 \$10,000 \$12,000 \$14,000 \$16,000 1 2 3 4 5 Life in Years Annual SL Depreciation \$0 \$2,000 \$4,000 \$6,000 \$8,000 \$10,000 1 2 3 4 5 Annual DDB Depreciation Life in Years \$0 \$5,000 \$10,000 \$15,000 \$20,000 1 2 3 4 5 P2 8-22 Most corporations use the Modified Accelerated Cost Recovery System (MACRS) for tax purposes....
View Full Document

{[ snackBarMessage ]}

### Page12 / 42

9,000 45,000 5,000 45,000 \$ 45,000 \$ Salvage Value...

This preview shows document pages 12 - 24. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online