On June 9, 2020, Blue Ribbon Company purchased manufacturing equipment at a cost of $345,000. Blue Ribbon
Question:
On June 9, 2020, Blue Ribbon Company purchased manufacturing equipment at a cost of $345,000. Blue Ribbon estimated that the equipment will produce 600,000 units over its five-year useful life, and have a residual value of $15,000. The company has a December 31 fiscal year end and has a policy of recording a half-year’s depreciation in the year of acquisition.
Instructions
a. Calculate depreciation under the straight-line method for 2020 and 2021.
b. Calculate the depreciation expense under the double diminishing-balance method for 2020 and 2021.
c. Calculate the depreciation expense under the units-of-production method, assuming the actual number of units produced was 71,000 in 2020 and 118,600 in 2021.
d. In this situation, what factors should the company consider in determining which depreciation method it should use?
Step by Step Answer:
Accounting Principles Volume 1
ISBN: 978-1119502425
8th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak