Case 1 Ibrahim Associates has production facility in Dubai. Ibrahim purchased machinery for AED 64,000 on January 2021. The company estimates the equipment to have a life of 4 years and an estimated salvage value of AED 4,000.

Additional information provided by the cost accountant is as follows:

a) The machinery is estimated to produce 8,000 units of product. It actually produced the following units: Year 1, 2,000 units, Year 2, 3,000 units, Year 3, 1,000 units, Year 4, 2,000 units.

Required

From the information given, compute the depreciation for year 1 and year 2 for the equipment under the following methods: (Round to the nearest dollar):

a) Sum-of-the-yearsdigits

b) Double-declining balance (200%)

c) Units-of-production

Formula

a) Sum-of-the-years-digits

Step 1 Determine sum of years digits

Step 2 Use a factor for depreciation times cost salvage value

b) Double-declining balance (200%)

Step 1 Year 1 = Cost / years of life x 200%

Step 2 Year 2 = Cost depreciation year 1 / years of life x 200%

c) Units-of-production

Step 1 Cost salvage value / units produced = unit depreciation

Step 2 Unit depreciation x unis produced year 1 and then year 2