1 answer

Where do the number of units come from in method C? Suppose FastShip purchased equipment on...

Question:

Where do the number of units come from in method C?Suppose FastShip purchased equipment on January 1, 2018, for $48,000. The expected useful life of the equipment is 10 years o

Suppose FastShip purchased equipment on January 1, 2018, for $48,000. The expected useful life of the equipment is 10 years or 56,250 units of production, and its residual value is $3,000. Under three depreciation methods, the annual depreciation expense and the balance of accumulated depreciation at the end of 2018 and 2019 are X (Click the icon to view the data.) Data Table Read the requirements. Method A Method B Method C Annual Requirement 1. Identify the depreciation method used in each instance, and show the equation and computation for each; round to the nearest dollar. Begin by identifying the depreciation method used in each instance. Depreciation method used Method A Straight-Line Method B Double-Declining-Balance Method C Units-of-Production Annual Depreciation Expense $ 4,500 Accumulated Depreciation Annual Depreciation Expense $ 9,600 Accumulated Depreciation Accumulated Depreciation Year Depreciation Expense $ 4,800 7,200 2018 $ 4,500 $ 9,600 $ 4,800 2019 4,500 9,000 7,680 17,280 12,000 Now, select the equation and show the computation of depreciation under Method A. (Abbreviation used: Depr. = Depreciation) Cost Residual value ) Useful life, in years Method A depreciation 48,000 3,000 10 4,500 X Requirements X Next, select the equation and show the computation of depreciation under Method B. (Enter any depreciation rate as a decimal to two places, XX.) Asset book value Depreciation rate per year Method B depreciation 2018 $ 48,000 0.2 9,600 2019 $ 38,400 0.2 = $ 7,680 1. Identify the depreciation method used in each instance, and show the equation and computation for each; round to the nearest dollar. 2. Determine the annual depreciation expense, accumulated depreciation, and book value of the equipment for 2018 through 2020 under each method, assuming 10,000 units of production in 2020. X Print Done Finally, select the equation and show the computation of depreciation under Method C. (Enter any depreciation rate as a decimal to two places, XX.) Depreciation per unit x Number of units Method C depreciation 2018 0.8 6,000 4,800 2019 0.8 9,000 $ 7,200 х

Answers

Depreciation per unit =($48,000 - $3,000) / 56,250 units =$0.80 per unit
Now the depreciation expense is given for 2018 and 2019 which is $4,800 and $7,200 respectively
Depreciation expense for 2018 =Depreciation per unit*No. of units produced in 2018
So by changing the formual:No. of units produced in 2018 =Depreciation expense for 2018 / Depreciation per unit
So by changing the formual:No. of units produced in 2018 =$4,800 / $0.80 =6,000 units
Similarly, No. of units produced in 2019 =$7,200 / $0.80 =9,000 units
Depreciation expense for 2020 =$0.80*10000 units =$8,000
Accumulated Depreciation for 2020 =$12,000+$8,000 =$20,000
I hope that now your query relating to Option C is resolved, I am not doing the rest as you have a specific question about Option C
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