Problem
Straight-Line and Units-of-Production Methods
Assume that Sample Company purchased factory equipment on January 1, 2017, for $65,000. The equipment has an estimated life of five years and an estimated residual value of $6,500. 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 2017, but production subsequent to 2017 will increase by 10,000 units each year.
Task
• Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Enter all amounts as positive values.