8)Depreciation Rate = 2 /useful life
= 2/40
= .05 or 5%
Year | Depreciation expense | Book value at end |
0 | 460000 | |
1 | 460000*5%= 23000 | 460000-23000= 437000 |
2 | 437000*5%= 21850 | 437000-21850= 415150 |
3 | 415150*5%= 20757.5 | 415150-20757.5 = 394392.5 |
Depreciation expense for year3 : 20757.5 (rounded to 20758 )
9)Units of production:
Depreciation rate per hour = [cost -residual value ]/useful life
= [1500000-150000]/50000
= $ 27 per hour
year | Actual hours | Depreciation expense |
2014 | 15000 | 27*15000= 405000 |
2015 | 14000 | 27*14000= 378000 |
2016 | 10000 | 27*10000=270000 |
2017 | 9000 | 27*9000= 243000 |
2018 | 6000 | 54000** (Balancing figure) |
Total | 54000 | 1350000 |
Since actual hours is greater than estimated hours of 50000 ,Such that depreciation for year 5 will be restricted .
Total depreciation over the life should be equals to or should not exceed " cost -residual value"
= 1500000 -150000
= 1350000
such that book value at end is equal to salvage value
b)Straight line method :[cost -residual value ]/useful life in years
= [1500000-150000]/5
= 270000
year | Depreciation expense |
2014 | 270000 |
2015 | 270000 |
2016 | 270000 |
2017 | 270000 |
2018 | 270000 |
Total | 1350000 |
c)
Double declining method:
Depreciation rate = 2/useful life
= 2/5
= .40 or 40%
Year | Depreciation expense | Book value at end |
0 | 1500000 | |
2014 | 1500000*.40= 600000 | 1500000-600000= 900000 |
2015 | 900000*.40= 360000 | 900000-360000= 540000 |
2016 | 540000*.40 = 216000 | 540000-216000= 324000 |
2017 | 324000*.40= 129600 | 324000-129600=194400 |
2018 | 44400 | 150000 |
Total |
Note:
Depreciation expense for 2018 = 194400*40%= 77760 which makes book value at end = 194400-77760 = 116640 which is below the minimum salvage value of $ 150000 .thus it means depreciation for year 2018 needs to be restricted such that book value at end is equals to salvage value.so depreciation expense for 2018 =Book value at 2017 - book value at 2018
194400 -150000 = 44400
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