Problem 7-70BDepreciation Method

1) Determine the amount of depreciation expense for the first and second years of the machine's life using the (a) straight-line and (b) double-declining balance depreciation methods

2) If the numbers of items engraved the first and second years was 120,000 and 135,000 respectively, compute the amount of depreciation expense for the first and second years machine life using the units of production method.

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

straight line year 2 book value= $53,800....Double declining year 2 book value=$41,728....Units of depreciation year 2 book value=$55,510

4Compute depreciation expense using various depreciation methods.

Graphic Design Inc. purchased a state-of-the-art laser engraving machine for $65,200. Graphic Design determined that the system had an expected life of 10 years (or 1,500,000 items engraved) and an expected residual value of $8,200.

Required:

1. Determine the amount of depreciation expense for the first and second years of the machines life using the (a) straight-line and (b) double-declining-balance depreciation methods.

2. If the number of items engraved the first and second years was 120,000 and 135,000, respectively, compute the amount of depreciation expense for the first and second years of the machines life using the units-of-production depreciation method.

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

   Answer

4. CONCEPTUAL CONNECTION What factors might management consider when selecting among depreciation methods?