Straight-Line and Units-of-Production Methods
Straight-Line and Units-of-Production Methods
Assume that Sample Company purchased factory equipment on January 1, 2008, for $60,000. The
equipment has an estimated life of five years and an estimated residual value of $6,000. Sample’s
accountant is considering whether to use the straight-line or the units-of-production method to
depreciate the asset. Because the company is beginning a new production process, the equipment
will be used to produce 10,000 units in 2008; but production subsequent to 2008 will increase by
10,000 units each year.
Required
Calculate the depreciation expense, the accumulated depreciation, and the book value of the
equipment under both methods for each of the five years of the asset’s life. Do you think that the
units-of-production method yields reasonable results in this situation? Explain.
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Answers
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Posted 19 Jun 2017 09:06 AM
My Price 4.00
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