Question

9) 9) Dersch Co. purchased a machine on January 1, 2014, for $1,500,000. Using the table below, calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 50,000 hours with a residual value of $150,000). During the machine's life it was used 15,000; 14,000; 10,000; 9,000; and 6,000 hours. Straight Line Units of Production Declining Balance Year 2014 2015 2016 2017 2018

Answer 1

1)

SL method Dep

Price	$1,500,000
purchase date	1-Jan-14
Life	5 years
Residual value	150,000
Depreciable value	Price-salvage value
=	1,500,000-150,000
	$1,350,000

SL Dep per annum=	Depreciable value/estimated life
	1,350,000/5
	$270,000
Year	Straight line Dep
2014	270,000
2015	270,000
2016	270,000
2017	270,000
2018	270,000

2)

Units of production method:

Price	$1,500,000
purchase date	1-Jan-14
Life	50000 hours
Residual value	150,000
Depreciable value	1,500,000-150,000
	$1,350,000
So $1,350,000 cost has to be depreciated for 50,000 hours usage
so per hour depreciation	1,350,000/50,000
	27
now dep charged for various hours each year will be
Year	No. of hours	Depexpense@$27 per hour	Accumulated dep
2014	15,000	405000	405000
2015	14,000	378000	783000
2016	10,000	270000	1053000
2017	9,000	243000	1296000
2018	6,000	54,000	1,350,000
		1350000

A property cannot be depreciated below its salvage value, so in the year 2018, $54,000 dep will be charged (accumulated dep- depreciable value)

3.

Declining balance

Kindly provide depreciation rate or whether it is double declining  .