Complete the following table given this information: (Do not round intermediate calculations.)
Cost of machine $ 90,400
Residual value $ 3,400
Useful life 5 years
Estimated units machine will produce 100,000
Actual production: Year 1 Year 2
54,000 11,500
Use MACRS table.
Year Depreciation Expense Accumulated Depreciation
1 $ 54,240 $ 54,240
2 $ 20,096 $ 74,336
3 $ 10,048 $ 84,384
4 $ 7,536 $ 91,920
5 $ 3,400 $ 95,320
To complete the table, we will need to calculate the annual depreciation expense using the Modified Accelerated Cost Recovery System (MACRS) method.
Step 1: Determine the depreciation rate for each year using MACRS table:
Year 1: According to the MACRS table, the depreciation rate for Year 1 is 20%.
Year 2: According to the MACRS table, the depreciation rate for Year 2 is 32%.
Step 2: Calculate the depreciation expense for each year:
Year 1: Depreciation expense = Cost of machine * Depreciation rate = $90,400 * 20% = $18,080
Year 2: Depreciation expense = Cost of machine * Depreciation rate = $90,400 * 32% = $28,928
Step 3: Calculate the accumulated depreciation for each year:
Year 1: Accumulated depreciation = Depreciation expense for Year 1 = $18,080
Year 2: Accumulated depreciation = Accumulated depreciation for Year 1 + Depreciation expense for Year 2
= $18,080 + $28,928 = $47,008
Step 4: Calculate the book value for each year:
Year 1: Book value = Cost of machine - Accumulated depreciation for Year 1
= $90,400 - $18,080 = $72,320
Year 2: Book value = Cost of machine - Accumulated depreciation for Year 2
= $90,400 - $47,008 = $43,392
Complete table:
Year | Depreciation Expense | Accumulated Depreciation | Book Value
--------------------------------------------------------------
1 | $18,080 | $18,080 | $72,320
2 | $28,928 | $47,008 | $43,392
Note: The table provides information for Year 1 and Year 2, but you can continue the calculations for the remaining years to complete the entire table.
To complete the table, we need to calculate the depreciation expense using the Modified Accelerated Cost Recovery System (MACRS) method for both Year 1 and Year 2. MACRS is a method of depreciating assets used for tax purposes.
1. Determine the depreciation basis:
The depreciation basis is the cost of the machine minus the residual value. In this case, it is $90,400 - $3,400 = $87,000.
2. Calculate the depreciation percentage for each year based on the useful life:
The MACRS table provides the depreciation percentages for each year based on the useful life. In this case, the useful life is 5 years.
Year 1: The MACRS depreciation percentage for Year 1 is 20%, since it is the first year.
Year 2: The MACRS depreciation percentage for Year 2 is 32%, as provided by the table.
3. Calculate the depreciation expense for each year:
To calculate the depreciation expense for each year, multiply the depreciation basis by the respective depreciation percentage.
Year 1: Depreciation expense = Depreciation basis x Depreciation percentage
= $87,000 x 20%
= $17,400
Year 2: Depreciation expense = Depreciation basis x Depreciation percentage
= $87,000 x 32%
= $27,840
4. Complete the table:
Year Actual Production Depreciation Expense
1 54,000 $17,400
2 11,500 $27,840
Please note that the depreciation expense is calculated based on the MACRS method, and the actual production numbers are provided for reference.