On March 20, 2006, Foley Co. purchased machinery for $400,000. Salvage value was estimated to be $50,000.

Question:

On March 20, 2006, Foley Co. purchased machinery for $400,000. Salvage value was estimated to be $50,000. The machinery will be depreciated over 5 years and is expected to produce 10,000 units. Calculate depreciation expense for the first 2 years on this machinery using each of the following methods:

a. Straight line

b. Activity method assuming that 1,000 units were produced in 2006 and 2,300 units were produced in 2007.

c. Double-declining balance

d. Sum-of-the-years’-digits

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...