Linda’s Chocolate Factory decided to expand its business and bought a new machine on 1 January 2021 for $26,000. Other costs incurred were transport cost (from Sydney to Melbourne) $900 and insurance cost of $400 during the transportation. The initial Machine Operator training cost is $1,200 whereas the ongoing Operator training refresher, held every 6 months is $600 The useful life of the machine was estimated to be four years (or 5,000 units of production) while the residual value was $3,000. The machine was used to produce 1,300 units in the first year 1,700 units in the second year, 1,600 units in the third and 400 units in the fourth year. The depreciation rate under the reducing balance method equals to 2x straight line rate. Requirement 1. Which depreciation method is the preferred method for Linda’s Chocolate Factory for taxation purposes? Does the total depreciation expense recorded over the entire useful life of the machine (i.e. over the four years) differ under different depreciation method? Requirement 2. Calculate the total cost of the new machine as well as its accumulated depreciation and carrying amount at the end of the second year under the units of production method.
Linda’s Chocolate Factory decided to expand its business and bought a new machine on 1 January 2021 for $26,000. Other costs incurred were transport cost (from Sydney to Melbourne) $900 and insurance cost of $400 during the transportation.
The initial Machine Operator training cost is $1,200 whereas the ongoing Operator training refresher, held every 6 months is $600
The useful life of the machine was estimated to be four years (or 5,000 units of production) while the residual value was $3,000.
The machine was used to produce 1,300 units in the first year 1,700 units in the second year, 1,600 units in the third and 400 units in the fourth year. The
Requirement 1.
Which depreciation method is the preferred method for Linda’s Chocolate Factory for
Requirement 2.
Calculate the total cost of the new machine as well as its
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