John Wayne Calendar
Posted in Posters on 12/26/2007 08:40 pm by admin
Accounting 120 ? Is this right? Studying for final but no answer key 
?
Problem One:
John Wayne Corporation purchased a piece of equipment on April 1, 2009 for $600,000. The equipment has a useful life of 5 years or 2,400,000 units of production, and no estimated salvage value. Compute the depreciation for 2009 and 2010 using the following methods: (a) straight-line, (b) units of production, and (c) double-declining-balance. Assume that the company’s fiscal year corresponds to the calendar year and that 360,000 and 520,000 units were produced in the respective years. Be sure to show all computations in the space provided.
a) Straight-Line
2009 (600,000-120,000)*1/5=96,000
2010 192,000 (96,000*2)
Straight line
I’m not sure where you’re getting your figures, but for straight-line, you just divide the cost (minus the salvage value) by the useful life. For the first year (2009) only nine months will be depreciated.
2009
(600,000 / 5) x 9/12 = $90,000
2010
600,000 / 5 = $120,000
Units of Production
$600,000 cost / 2,400,000 estimated units of production = $0.25 depreciation per unit of production.
2009
360,000 x .25 = $90,000
2010
520,000 x .25 = $130,000
Double-declining balance
Straight-line depreciation percentage is 20% per year, so the double-declining percentage will be 40%. You will multiply this times the new book value of the equipment every depreciation year.
2009
600,000 x 40% x 9/12 = 180,000
2010
600,000 x 40% x 3/12 = 60,000 The new book value at the end of March 2010 is now $360,000 (600,000 – 180,000 – 60,000).
360,000 x 40% x 9/12 = 108,000
Total depreciation for 2010 is $168,000 (60,000 + 108,000)
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