Problem 7-70B (Algorithmic) Depreciation Methods

Graphic Design Inc. purchased a state-of-the-art laser engraving machine for $90,000. Graphic Design Inc. determined that the system had an expected life of 10 years (or 2,000,000 items engraved) and an expected residual value of $5,000.

Required:

1. Determine the amount of depreciation expense for the first and second years of the machine's life using the:

a. Straight-line method. Round your answer to the nearest whole dollar, and do not round intermediate calculations.

Depreciation expense: $fill in the blank 1 per year

b. Double-declining-balance method. Round all amounts to the nearest whole dollar, and use rounded amounts for subsequent calculations.

	Depreciation Expense
Year 1
Year 2

2. If the number of items engraved the first and second years was 205,000 and 187,000 respectively, compute the amount of depreciation expense for the first and second years of the machine's life using the units-of-production depreciation method. Round your answers to the nearest whole dollar, and do not round intermediate calculations.

	Depreciation Expense
Year 1
Year 2

3. Compute the book values for all three depreciation methods as of the end of the first and second years of the system's life.

	Year 1	Year 2
Straight-line method
Double-declining-balance method
Units-of-production method