For your analysis you have been asked to compare methods bas

For your analysis, you have been asked to compare methods based on a machine that cost $176,000. The estimated useful life is 10 years, and the estimated residual value is $33,440. The machine has an estimated useful life in productive output of 216,000 units. Actual output was 28,000 in year 1 and 24,000 in year 2. Required: 1. For years 1 and 2 only, prepare separate depreciation schedules assuming: (Do not round intermediate calculations and round your final answers to the nearest dollar amount.) a. Straight-line method.

Solution

a. Straight-line method:

Depreciation = (Cost of machine - Estimated residual value) / Estimated useful life

Year 1 depreciation = ($176,000 - $33,440) / 10 = $14,256

Year 2 depreciation = ($176,000 - $33,440) / 10 = $14,256