Required information [The following information applies to the questions displayed below] Ramirez Company installs a computerized…
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Question “Required information [The following information applies to the questions displayed below] Ramirez Company installs a computerized…”
Answer
Answer: Second year depreciation = $3930
Book value at year 2 = $76740
Explanation – Straight Line Method
= Cost of asset- Salvage Value of asset/No. years)
= ($84600-$6000/20 years
=$78600/20 Years
= $3930
Annual depreciation expense = $3930.
Depreciation in the first year = $3930
Book value at year 1 = $84600-$3930 = 80670
Second year depreciation = $3930
Book value at year 2 = $80670-$3930 = $76740
Answer: The depreciation cost for Year 2 is $6660.
Explanation – Unit of production:-Annual depreciation cost per unit
=Cost-salvage /Total units
=($84600-$6000)/393000 units
=$0.20 per unit
Depreciation expense for year 2 = Depreciation cost per unit*Units manufactured
=$0.20 per unit*33300 units
=$6660
Answer:-Depreciation cost for Year 2 = $7614.
Explanation-
The following formula is used to calculate double decrescend balance depreciation:
Depreciation = Book Value + Depreciation Rate |
The following formula calculates the depreciation rate:
Depreciation Rate = Accelerator *Straight Line Rate |
Straight-line Depreciation Rate = 1/20 = 0.05 = 5%
Double Declining Balance Rate = 15%*2 = 10%
Year 1: Depreciation = $84600 *10% = $8460
Book value at the end of Year 1 = $84600, $8460 = $76140
Year 2019: Depreciation = $76140* 10% = $66114
Conclusion
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