Ramirez company installs a computerized manufacturing machine

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1. Award: 2 out of 2.00 points

On January 1, the Matthews Band pays $65,600 for sound equipment. The band estimates it will use this equipment for five years and perform 200 concerts. It estimates that after five years it can sell the equipment for $2,000. During the first year, the band performs 45 concerts. Compute the first-year depreciation using the straight-line method.

Straight-Line Depreciation

Choose Numerator: / Choose Denominator: = Annual Depreciation Expense

Cost minus salvage  / Estimated useful life (years)  = Depreciation expense

$ 63,600  / 5  = $ 12,720 

References

Worksheet Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of- production, and declining-balance methods.

On January 1, the Matthews Band pays $65,600 for sound equipment. The band estimates it will use this equipment for five years and perform 200 concerts. It estimates that after five years it can sell the equipment for $2,000. During the first year, the band performs 45 concerts. Compute the first-year depreciation using the straight-line method.

$ $

Straight-Line Depreciation

Choose Numerator: / Choose Denominator: = Annual Depreciation Expense

Cost minus salvage / Estimated useful life (years) = Depreciation expense

63,600 / 5 = 12,720

Explanation:

Straight-line: First-year depreciation ($65,600 – $2,000) / 5 years = $12,720

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2. Award: 2 out of 2.00 points

On January 1, the Matthews Band pays $65,600 for sound equipment. The band estimates it will use this equipment for five years and perform 200 concerts. It estimates that after five years it can sell the equipment for $2,000. During the first year, the band performs 55 concerts. Compute the first-year depreciation using the units-of-production method.

Select formula for the depreciation rate of Units of Production:

(Cost - Salvage value) / Total units of production 

Calculate the first year depreciation expense:

Depreciation per concert $ 318.00 

Concerts in first year 55 

Depreciation in first year $ 17,490

References

Expanded table Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of-production, and declining-balance methods.

On January 1, the Matthews Band pays $65,600 for sound equipment. The band estimates it will use this equipment for five years and perform 200 concerts. It estimates that after five years it can sell the equipment for $2,000. During the first year, the band performs 55 concerts. Compute the first-year depreciation using the units-of-production method.

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3. Award: 2 out of 2.00 points

A building is acquired on January 1, at a cost of $1,000,000 with an estimated useful life of 10 years and salvage value of $90,000. Compute depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest dollar.)

Depreciation for the Period End of Period

Annual Period Beginning of Period

Book Value

Depreciation Rate (%)

Depreciation Expense

Accumulated Depreciation Book Value

First Year $ 1,000,000  20%  $ 200,000  $ 200,000 $ 800,000

Second Year 800,000  20%  160,000  360,000 640,000

Third Year 640,000  20%  128,000  488,000 512,000

References

Expanded table Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of-production, and declining-balance methods.

A building is acquired on January 1, at a cost of $1,000,000 with an estimated useful life of 10 years and salvage value of $90,000. Compute depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest dollar.)

$ $

+/-1

Depreciation for the Period End of Period

Annual Period Beginning of Period Book

Value

Depreciation Rate (%)

Depreciation Expense

Accumulated Depreciation Book Value

First Year 1,000,000 20% 200,000

Second Year 800,000 20% 160,000

Third Year 640,000 20% 128,000

$ 200,000 $ 800,000

360,000 640,000

488,000 512,000

F F

F F

F F

Explanation:

Note: Double-declining-balance rate = (100% / 10 years) × 2 = 20%

First year: $1,000,000 × 20% $ 200,000 Second year: ($1,000,000 − $200,000) × 20% $ 160,000 Third year: ($1,000,000 − $200,000 − $160,000) × 20% $ 128,000*

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Score: 30/30 Points 100 %

[The following information applies to the questions displayed below.] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $45,700. The machine's useful life is estimated at 10 years, or 397,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 33,700 units of product.

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4. Award: 4 out of 4.00 points

Determine the machine’s second-year depreciation and year end book value under the straight-line method.

Straight-Line Depreciation

Choose Numerator: / Choose Denominator: = Annual Depreciation Expense

Cost minus salvage  / Estimated useful life (years)  = Depreciation expense

$ 39,700  / 10  = $ 3,970

Year 2 Depreciation $ 3,970 

Year end book value (Year 2) $ 37,760 

References

Expanded table Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of- production, and declining-balance methods.

Determine the machine’s second-year depreciation and year end book value under the straight-line method.

$

$

$

Straight-Line Depreciation

Choose Numerator: / Choose Denominator: = Annual Depreciation Expense

Cost minus salvage / Estimated useful life (years) = Depreciation expense

39,700 / 10 =

Year 2 Depreciation 3,970

Year end book value (Year 2) 37,760

$ 3,970

F

Explanation:

Straight-line ($45,700 − $6,000) / 10 years = $3,970

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Score: 30/30 Points 100 %

[The following information applies to the questions displayed below.] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $45,700. The machine's useful life is estimated at 10 years, or 397,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 33,700 units of product.

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5. Award: 5.50 out of 5.50 points

Determine the machine’s second-year depreciation using the units-of-production method.

Units-of-production Depreciation

Choose Numerator: / Choose Denominator: = Annual Depreciation Expense Cost minus salvage  / Total units of production  = Depreciation expense per unit

$ 39,700  / 397,000  = $ 0.10

Year Annual Production (units) Depreciation Expense

2 33,700  $ 3,370 

References

Expanded table Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of-production, and declining-balance methods.

Determine the machine’s second-year depreciation using the units-of-production method.

$

$

Units-of-production Depreciation

Choose Numerator: / Choose Denominator: = Annual Depreciation Expense

Cost minus salvage / Total units of production = Depreciation expense per unit

39,700 / 397,000 =

Year Annual Production (units) Depreciation Expense

2 33,700 3,370

$ 0.10

F

Explanation:

Units-of-production: Depreciation per unit = ($45,700 − $6,000) / 397,000 units = $0.10 per unit For 33,700 units in second year: Depreciation = 33,700 × $0.10 = $3,370

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Score: 30/30 Points 100 %

[The following information applies to the questions displayed below.] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $45,700. The machine's useful life is estimated at 10 years, or 397,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 33,700 units of product.

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6. Award: 5.50 out of 5.50 points

Determine the machine’s second-year depreciation using the double-declining-balance method.

Double-declining-balance Depreciation

Choose Factors: x Choose Factor(%) = Annual

Depreciation Expense

Beginning book value  x

Double the straight-line rate  =

Depreciation expense

First year's depreciation $ 45,700  x 20%  = $ 9,140

Second year's depreciation $ 36,560  x 20%  = $ 7,312

References

Expanded table Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of-production, and declining- balance methods.

Determine the machine’s second-year depreciation using the double-declining-balance method.

$

$

Double-declining-balance Depreciation

Choose Factors: x Choose Factor(%) = Annual Depreciation Expense Beginning book value x Double the straight-line rate = Depreciation expense

First year's depreciation 45,700 x 20% =

Second year's depreciation 36,560 x 20% =

$ 9,140

$ 7,312

F

F

Explanation:

Double-declining-balance rate = (100% / 10 years) × 2 = 20% per year First year’s depreciation = $45,700 × 20% = $9,140 Book value at beginning of second year = $45,700 − $9,140 = $36,560 Second year’s depreciation = $36,560 × 20% = $7,312

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Score: 30/30 Points 100 %

[The following information applies to the questions displayed below.] NewTech purchases computer equipment for $270,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $31,000. rev: 07_27_2017_QC_CS-94103

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7. Award: 4 out of 4.00 points

Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.

Straight-Line Depreciation

Choose Numerator: / Choose Denominator: =

Annual Depreciation

Expense Cost minus salvage

 / Estimated useful life (years)

 = Depreciation expense $ 239,000  / 4  = $ 59,750

Year Annual Depreciation Year-End Book Value

Year 1

$ 59,750  $ 210,250 

Year 2

59,750  150,500 

Year 3

59,750  90,750 

Year 4

59,750  31,000 

Total $ 239,000

rev: 08_22_2017_QC_CS-96211

References

Expanded table Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of- production, and declining-balance methods.

Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.

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Score: 30/30 Points 100 %

[The following information applies to the questions displayed below.] NewTech purchases computer equipment for $270,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $31,000. rev: 07_27_2017_QC_CS-94103

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8. Award: 5 out of 5.00 points

Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation. (Enter all amounts positive values.)

Depreciation for the Period End of Period

Year Beginning- Year Book

Value Depreciation

Rate Annual

Depreciation Accumulated Depreciation

Year-End Book Value

Year 1

$ 270,000  50%  $ 135,000  $ 135,000  $ 135,000 

Year 2

135,000  50%  67,500  202,500  67,500 

Year 3

67,500  50% 33,750  236,250  33,750 

Year 4 33,750 50%

2,750  239,000  31,000 

Total $ 239,000

References

Expanded table Difficulty: 2 Medium Learning Objective: 10-P1 Compute and record depreciation using the straight-line, units-of- production, and declining-balance methods.

Prepare a table showing depreciation and book value for each of the four years assuming double-declining- balance depreciation. (Enter all amounts positive values.)

Explanation:

Double-declining-balance depreciation Depreciation rate: 100% / 4 years = 25%; 25% × 2 = 50% Do not depreciate more than $2,750 in the fourth year since the salvage value is not subject to depreciation.