A machine that produces cellphone components is purchased on January 1, 2020, for $100,000. It is expected
Question:
A machine that produces cellphone components is purchased on January 1, 2020, for $100,000. It is expected to have a useful life of four years and a residual value of $10,000. The machine is expected to produce a total of 200,000 components during its life, distributed as follows: 40,000 in 2020, 50,000 in 2021, 60,000 in 2022, and 50,000 in 2023. The company has a December 31 year end.
Required
a. Calculate the amount of depreciation to be charged each year, using each of the following methods:
i. Straight-line
ii. Units-of-production
iii. Double-diminishing-balance
b. Which method results in the highest depreciation expense:
i. During the first two years?
ii. Over all four years?
Step by Step Answer:
Understanding Financial Accounting
ISBN: 9781119406921
2nd Canadian Edition
Authors: Christopher D. Burnley