Question

On January 1,2018, a machine was purchased for $100,000. The machine has an estimated salvage value of $5,920 and an estimated useful life of 5 years. The machine can operate for 112,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 22,400 hrs; 2019, 28,000 hrs; 2020, 16,800 hrs; 202 1, 33,600 hrs; and 2022, 11,200 hrs. (a) Compute the annual depreciation charges over the machine's life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to O decimal places, e.g. 45,892.) $ 1. Straight-line Method 2. Activity Method Year $ 2018 $ 2019 $ 2020 2021 $ 2022

Answer 1

Straight Line
Date	Cost of asset	Depreciable cost	Depreciation rate	Depreciation expenses	Accumulated Depreciation	Book value
2018	$1,00,000	$94,080	20%	$18,816	$18,816	$81,184
2019	$1,00,000	$94,080	20%	$18,816	$37,632	$62,368
2020	$1,00,000	$94,080	20%	$18,816	$56,448	$43,552
2021	$1,00,000	$94,080	20%	$18,816	$75,264	$24,736
2022	$1,00,000	$94,080	20%	$18,816	$94,080	$5,920
Units of production
Date	Depreciable cost	Depreciation per hours	No. of hours	Depreciation expenses	Accumulated Depreciation	Book value
2018	$94,080	$0.84	22400	$18,816	$18,816	$81,184
2019	$94,080	$0.84	28000	$23,520	$42,336	$57,664
2020	$94,080	$0.84	16800	$14,112	$56,448	$43,552
2021	$94,080	$0.84	33600	$28,224	$84,672	$15,328
2022	$94,080	$0.84	11200	$9,408	$94,080	$5,920
Sum of Year digits method
Date	Cost of asset	Depreciable cost	Remaining Life	Depreciation expenses	Accumulated Depreciation	Book value
2018	$1,00,000	$94,080	5	$31,360	$31,360	$68,640
2019	$1,00,000	$94,080	4	$25,088	$56,448	$43,552
2020	$1,00,000	$94,080	3	$18,816	$75,264	$24,736
2021	$1,00,000	$94,080	2	$12,544	$87,808	$12,192
2022	$1,00,000	$94,080	1	$6,272	$94,080	$5,920
Total			15
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
2018	$1,00,000	$1,00,000	40.00%	$40,000	$40,000	$60,000
2019	$1,00,000	$60,000	40.00%	$24,000	$64,000	$36,000
2020	$1,00,000	$36,000	40.00%	$14,400	$78,400	$21,600
2021	$1,00,000	$21,600	40.00%	$8,640	$87,040	$12,960
2022	$1,00,000	$12,960	40.00%	$5,184	$92,224	$7,776