Computing Depreciation under Alternative Methods Sterling Steel Inc. purchased a new stamping machine at the beginning of the year at a cost of $580,000. The estimated residual value was $60,000. Assume that the estimated useful life was five years, and the estimated productive life of the machine was 260,000 units. Actual annual production was as follows:
|
Year |
Units |
|
1 |
73,000 |
|
2 |
62,000 |
|
3 |
30,000 |
|
4 |
53,000 |
|
5 |
42,000 |
Required:
1. Complete a separate depreciation schedule for each of the alternative methods. Round your answers to the nearest dollar.
a. Straight line.
b. Units of production.
c. Double declining balance.
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Method: |
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|
Year |
Computation |
Depreciation Expense |
Accumulated Depreciation |
Net Book Value |
|
At acquisition |
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|
1 |
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2 |
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2. Assuming that the machine was used directly in the production of one of the products that the company manufactures and sells, what factors might management consider in selecting a preferable depreciation method in conformity with the matching principle?