On June 1, 2014, Flippy-Floppy purchased a manufacturing machine for
$830,000. Additionally, FOB Shipping Point was $4,000. Flippy-Floppy
paid $20,000 to modify the production line to accommodate the new
machine. Handy-Dandy charged an installation and testing fee of
$10,000. The machine has an eight-year estimated life and a $44,000 estimated
salvage value. Flippy-Floppy expects to manufacture 1,800,000 units over the life
of the machine.
Required: Complete the required depreciation schedules on the manufacturing
machine for each method listed. (Do not provide any supporting calculations.)
The additional production information is as follows:
Year Production Year Production
2014 110,000 2018 500,000
2015 300,000 2019 450,000
2016 350,000 2020 375,000
2017 350,000 2021 400,000
Schedules for:
a. Straight-line.
Year Depreciation Expense Accumulated Depreciation End of Year Book Value
2014
2015
2016
b. Double-declining balance.
Year DepreciationExpense AccumulatedDepreciation End of Year BookValue
2014
2015
2016
2017
2018
2019
2020
2021
2022
c. Sum-of-the-years’ digits.
Year DepreciationExpense AccumulatedDepreciation End of Year BookValue
2014
2015
2016
2017
2018
2019
2020
2021
2022
d. Units of production.
Year DepreciationExpense AccumulatedDepreciation End of Year BookValue
2014
2015
2016
2017
2018
2019
2020
2021
Value of the machinary
| Particular | Amount |
| Value of the machinary | 830,000.00 |
| FOB Shipping Point | 4,000.00 |
| Modification Expanses | 20,000.00 |
| Installation and testing exp | 10,000.00 |
| total | 864,000.00 |
| Estimated life | 8 year |
| Salvage value | 44,000.00 |
| Manufature units over life | 1,800,000.00 |
| Year | Production |
| 2014 | 110,000.00 |
| 2015 | 300,000.00 |
| 2016 | 350,000.00 |
| 2017 | 350,000.00 |
| 2018 | 500,000.00 |
| 2019 | 450,000.00 |
| 2020 | 375,000.00 |
| 2021 | 400,000.00 |
a. Straight-line.
Total cost of Machine = 864000
less:
Salvage value = 44000
Net Value =820,000
Depriciation per year= 820,000 / 8
=102,500
| Year | Depriciation Exp | Accumulated Dep | End of year book value |
| 2014 | 102500 | 102500 | 761500 |
| 2015 | 102500 | 205000 | 659000 |
| 2016 | 102500 | 307500 | 556500 |
b. Double-declining balance.
Depriciation rate by straightline method is =12.5 % (100/8)
So depriciation as per DDM= 25%
=( 2 * Straight-line depreciation rate × Book value at the beginning of the year)
| Year | Opeaning balance | Depriciation Exp |
Accumulated Dep |
End of year book value |
| 2014 | 864000 | 216000 | 216000 | 648000 |
| 2015 | 648000 | 162000 | 378000 | 486000 |
| 2016 | 486000 | 121500 | 499500 | 364500 |
| 2017 | 364500 | 91125 | 590625 | 273375 |
| 2018 | 273375 | 68344 | 658969 | 205031 |
| 2019 | 205031 | 51258 | 710227 | 153773 |
| 2020 | 153773 | 38443 | 748670 | 115330 |
| 2021 | 115330 | 71330 | 820000 | 44000 |
| 2022 | 44000 | 0 | 0 | 0 |
c. Sum-of-the-years’ digits.
| Year | Remaining Useful life | Syd | Applicable % | Annual Depriciation | Accumulated Dep |
End of year book value |
| 1.00 | 8 | 8 / 36 | 22.2 | 182222.22 | 182222.22 | 681777.78 |
| 2.00 | 7 | 7 / 36 | 19.4 | 159444.44 | 341666.67 | 522333.33 |
| 3.00 | 6 | 6 / 36 | 16.7 | 136666.67 | 478333.33 | 385666.67 |
| 4.00 | 5 | 5 / 36 | 13.9 | 113888.89 | 592222.22 | 271777.78 |
| 5.00 | 4 | 4 / 36 | 11.1 | 91111.11 | 683333.33 | 180666.67 |
| 6.00 | 3 | 3 / 36 | 8.3 | 68333.33 | 751666.67 | 112333.33 |
| 7.00 | 2 | 2 / 36 | 5.6 | 45555.56 | 797222.22 | 66777.78 |
| 8.00 | 1 | 1 / 36 | 2.8 | 22777.78 | 820000.00 | 44000.00 |
| Total | 36 | 100 | 820000 | |||
d. Units of production.
| Depreciation = | Number of Units Produced | × (Cost − Salvage Value) |
| Life in Number of Units |
| Year | Production | Annual Depriciation | Accumulated Dep |
End of year book value |
| 2014 | 110,000 | 31,816.58 | 31,816.58 | 832,183.42 |
| 2015 | 300,000 | 86,772.49 | 118,589.07 | 745,410.93 |
| 2016 | 350,000 | 101,234.57 | 219,823.63 | 644,176.37 |
| 2017 | 350,000 | 101,234.57 | 321,058.20 | 542,941.80 |
| 2018 | 500,000 | 144,620.81 | 465,679.01 | 398,320.99 |
| 2019 | 450,000 | 130,158.73 | 595,837.74 | 268,162.26 |
| 2020 | 375,000 | 108,465.61 | 704,303.35 | 159,696.65 |
| 2021 | 400,000 | 115,696.65 | 820,000.00 | 44,000.00 |
| 2,835,000 |
