Depreciation Methods On January 2, 2018, Skyler, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $120,000, and its estimated useful life was four years or 920,000 cuttings, after which it could be sold for $5,000. Required a. Calculate each year’s depreciation expense for the machine's useful life under each of the following depreciation methods (round all answers to the nearest dollar): 1. Straight-line. 2. Double-declining balance. 3. Units-of-production. (Assume annual production in cuttings of 200,000; 350,000; 260,000; and 110,000.)

Instructions are listed below.

Explanation:

Giving the following information:

The machine cost $120,000, and its estimated useful life was four years or 920,000 cuttings, after which it could sell for $5,000.

Each method has a different formula. In the straight-line depreciation, each year's depreciation expense is the same. On the other hand, double-declining balance depreciation expense declines with the years. While the units of production method, depreciation expense varies according to use.

A) Straight-line:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (120,000 - 5,000)/4= $28,750 per year

B) Double declining balance:

Annual depreciation= 2*[(book value)/estimated life (years)]

Year 1= 2*(115,000/4)= 57,500

Year 2= 2*[(115,000 - 57,500)/4]= 28,750

Year 3= 2*[(57,500 - 28,750)/4]= 14,375

Year 4= 2*[(28,750 - 14,375)/4]= 7,187.5

C) Units of production:

Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced

Year 1= [(115,000)/920,000]*200,000= $25,000

Year 2= (0.125)*350,000= 43,750

Year 3= 0.125*260,000= $32,500

Year 4= 0.125*110,000= $13,750

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return

answer; capital structure decision;