Project for Accounting:

As a cost accountant for San Francisco Tannery you have been

approached by Phil Perriman, tanning room supervisor, about the 2014
costs charged to his department. In particular he is concerned about
the line item depreciation. Perriman is very proud of the excellent
condition of his tanning room equipment. He has always been vigilant
about keeping all equipment services and well oiled. He is sure that the
huge charge to depreciation is a mistake. It does not at all reflect the
cost of minimal wear and tear that the machines have experienced
over the last year. He believes the charge should be considerably
lower. The machines being depreciated are 6 automatic tanning
machines. All were put into use on January 1 st 2014. Each costs
$625,000 having a salvage value of $55k and a useful life of 12 years.
San Francisco Tannery depreciates this and similar assets using double
declining balance depreciation. Perriman has also pointed out that if
you use straight-line depreciation, the charge to depreciation would
not be so great.
o Write a memo to Phil Perriman to clear up his misunderstanding
of the term depreciation. Also calculate year one depreciation on
all machines using both methods (double declining, straight
line). Explain the theoretical justification for double declining
balance and why in the long run the aggregate charge to
depreciation will be the same under both methods.
o Memo first line To: Phil Perriman, Supervisor of Tanning Room
o Double space From: Alexander Bohm (or your name),
Intermediate Accounting II Student, Spring/2016
o Double Space Date (submission date May 18 th 2016)
o Double Space Subject: Annual Depreciation Charge to the
Canning
o 12 point font Arial Black no more than two pages, single
spaced, not longer than two pages
o Last line I hope that this explanation helps clarify any
questions which you may have had about depreciation charges
to your department.
o Discuss depreciation conceptually
o Straight line method vs double declining balance method
o Purpose of this memo is to clarify any questions that the
supervisor of the tanning room may having had about
depreciation charges to his department