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A)determine the appropriate amount to complete the following schedule
B)
C)
Solution
1
Calculation of Depreciation and Book Values
Method of Depreciation
Depreciation Formula
Depreciation Expense For
Book value at the end of
Year 1
Year 2
Year 1
Year 2
Straight Line
(Cost- Salvage Value)/Life
$ 10,414.00
$ 10,414.00
$ 102,586.00
$ 92,172.00
(113000-8860)/10
(113000-8860)/10
(113000-10414)
(102586-10414)
Units of Production
(Cost- Salvage Value)*Actual Production /Life in production units
$ 41,000.00
$ 42,640.00
$ 72,000.00
$ 29,360.00
(113000-8860)*50000/127000
(113000-8860)*52000/127000
(113000-41000)
(72000-42640)
Double Declining Balance
Previous Book Value * (2/life)
$ 22,600.00
$ 18,080.00
$ 90,400.00
$ 72,320.00
(113000*(2/10)
(90400*(2/10)
(113000-22600)
(90400-18080)
2a
The Depreciation is highest as per Units of Production method in year 1, hence it will result in
lowest EPS.
2b
The Depreciation is highest as per Units of Production method in year 2, hence it will result in
lowest EPS.
3
Depreciation amount does not affect the cash outflows, because it is a non cash expense.
1
Calculation of Depreciation and Book Values
Method of Depreciation
Depreciation Formula
Depreciation Expense For
Book value at the end of
Year 1
Year 2
Year 1
Year 2
Straight Line
(Cost- Salvage Value)/Life
$ 10,414.00
$ 10,414.00
$ 102,586.00
$ 92,172.00
(113000-8860)/10
(113000-8860)/10
(113000-10414)
(102586-10414)
Units of Production
(Cost- Salvage Value)*Actual Production /Life in production units
$ 41,000.00
$ 42,640.00
$ 72,000.00
$ 29,360.00
(113000-8860)*50000/127000
(113000-8860)*52000/127000
(113000-41000)
(72000-42640)
Double Declining Balance
Previous Book Value * (2/life)
$ 22,600.00
$ 18,080.00
$ 90,400.00
$ 72,320.00
(113000*(2/10)
(90400*(2/10)
(113000-22600)
(90400-18080)
2a
The Depreciation is highest as per Units of Production method in year 1, hence it will result in
lowest EPS.
2b
The Depreciation is highest as per Units of Production method in year 2, hence it will result in
lowest EPS.
3
Depreciation amount does not affect the cash outflows, because it is a non cash expense.

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A)determine the appropriate amount to complete the following schedul.pdf

  • 1. A)determine the appropriate amount to complete the following schedule B) C) Solution 1 Calculation of Depreciation and Book Values Method of Depreciation Depreciation Formula Depreciation Expense For Book value at the end of Year 1 Year 2 Year 1 Year 2 Straight Line (Cost- Salvage Value)/Life $ 10,414.00 $ 10,414.00 $ 102,586.00 $ 92,172.00 (113000-8860)/10 (113000-8860)/10 (113000-10414) (102586-10414) Units of Production (Cost- Salvage Value)*Actual Production /Life in production units $ 41,000.00 $ 42,640.00 $ 72,000.00 $ 29,360.00 (113000-8860)*50000/127000 (113000-8860)*52000/127000 (113000-41000)
  • 2. (72000-42640) Double Declining Balance Previous Book Value * (2/life) $ 22,600.00 $ 18,080.00 $ 90,400.00 $ 72,320.00 (113000*(2/10) (90400*(2/10) (113000-22600) (90400-18080) 2a The Depreciation is highest as per Units of Production method in year 1, hence it will result in lowest EPS. 2b The Depreciation is highest as per Units of Production method in year 2, hence it will result in lowest EPS. 3 Depreciation amount does not affect the cash outflows, because it is a non cash expense. 1 Calculation of Depreciation and Book Values Method of Depreciation Depreciation Formula Depreciation Expense For Book value at the end of Year 1 Year 2 Year 1 Year 2 Straight Line (Cost- Salvage Value)/Life $ 10,414.00 $ 10,414.00 $ 102,586.00 $ 92,172.00 (113000-8860)/10
  • 3. (113000-8860)/10 (113000-10414) (102586-10414) Units of Production (Cost- Salvage Value)*Actual Production /Life in production units $ 41,000.00 $ 42,640.00 $ 72,000.00 $ 29,360.00 (113000-8860)*50000/127000 (113000-8860)*52000/127000 (113000-41000) (72000-42640) Double Declining Balance Previous Book Value * (2/life) $ 22,600.00 $ 18,080.00 $ 90,400.00 $ 72,320.00 (113000*(2/10) (90400*(2/10) (113000-22600) (90400-18080) 2a The Depreciation is highest as per Units of Production method in year 1, hence it will result in lowest EPS. 2b The Depreciation is highest as per Units of Production method in year 2, hence it will result in lowest EPS. 3 Depreciation amount does not affect the cash outflows, because it is a non cash expense.