On January 1, 2019, Loeffler Company acquired a machine at a cost of $200,000. Loeffler estimates that it will use the machine for 4 years or 8,000 machine hours. It estimates that after 4 years the machine can be sold for $20,000. Loeffler uses the machine for 2,100 and 1,800 machine hours in 2019 and 2020, respectively. Required:
Compute depreciation expense for 2019 and 2020 using the () straight-line, (2) double- declining-balance, and (3) units-of-production methods of depreciation

1. $45,000

$45,000

2. $100,000

$50,000

3. $47250

$40,500

Explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($200,000 - $20,000) / 4 = $45,000

Depreciation expense each year would be $45,000

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life) = 2/4 = 1/2

Depreciation expense in 2019 = 1/2 x 200,000 = $100,000

Book value in 2020 = 200,0000 - 100,000 = 100,000

Depreciation expense in 2019 = 1/2 x 100,000 = 50,000

Activity method based on hours worked = (hours worked that year / total hours of the machine) x  (Cost of asset - Salvage value)

2019 = ($200,000 - $20,000) x ( 2,100 / 8000) = 47250

2020 =  ($200,000 - $20,000) x ( 1800 / 8000) = 40,500

answer/// there is an inverse relationship between price and quantity demanded;