Shining Cookie Company, Inc., in Murfreesboro, TN bought a new ice cream maker at the beginning of the year at a cost of $28,000. The estimated useful life was four years, and the residual value was $2,560. Assume that the estimated productive life of the machine was 10,600 hours. Actual annual usage was 4,240 hours in year 1; 3,180 hours in year 2; 2,120 hours in year 3; and 1,060 hours in year 4.

Shining Cookie Company, Inc., in Murfreesboro, TN  bought a new ice cream maker at the beginning of the year at a cost of $28,000. The estimated useful life was four years, and the residual value was $2,560. Assume that the estimated productive life of the machine was 10,600 hours. Actual annual usage was 4,240 hours in year 1; 3,180 hours in year 2; 2,120 hours in year 3; and 1,060 hours in year 4.
 

Required:

1. Complete a separate depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.)

a. Straight-line.

b. Units-of-production (use four decimal places for the per unit output factor).

 

 

c. Double-declining-balance.

 

  

 

Explanation:

1.

a. Straight-line:

Computation:

Year 1: ($28,000 − $2,560) × 1/4 = $6,360

Year 2: ($28,000 − $2,560) × 1/4 = $6,360

Year 3: ($28,000 − $2,560) × 1/4 = $6,360

Year 4: ($28,000 − $2,560) × 1/4 = $6,360

b. Units-of-production: ($28,000 − $2,560) ÷ 10,600 = $2.40 per hour of output

Computation:

Year 1: $2.40 × 4,240 hours = $10,176

Year 2: $2.40 × 3,180 hours = $7,632

Year 3: $2.40 × 2,120 hours = $5,088

Year 4: $2.40 × 1,060 hours = $2,544

c. Double-declining-balance:

Computation:

Year 1: ($28,000 − $0) × 2/4 = $14,000

Year 2: ($28,000 − $14,000) × 2/4 = $7,000

Year 3: ($28,000 − $21,000) × 2/4 = $3,500

Year 4: ($28,000 − $24,500) × 2/4 = $1,750 (Too large) = 940

here