Question

In recent years, Sandhill Corporation has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine Acquired Cost Residual Value Useful Life (in years) Depreciation Method 1 Jan. 1, 2018 $104,000 $12,600 5 Straight-line 2 July 1, 2019 91,250 9,150 5 Diminishing-balance 3 Nov. 1, 2019 56,434 6,570 6 Units-of-production For the diminishing-balance method, Sandhill Corporation uses double the straight-line rate. For the units-of-production method, total machine hours are expected to be 21,680. Actual hours of use in the first 3 years were: 2019, 420; 2020, 4,110; and 2021, 5,390.

Prepare separate depreciation schedules for each machine. Prepare the schedule for all years, information permitting.

Answer 1

Straight Line Method
Useful Life		5	Years
Cost		$              1,04,000
Residual Value		$                  12,600
Rate		17.58%
Depreciable Value		$                  91,400
Year	Depreciation Expenses	Acc Depreciation	Book Value End Of Year
1	$                               18,280	$                  18,280	$                                85,720
2	$                               18,280	$                  36,560	$                                67,440
3	$                               18,280	$                  54,840	$                                49,160
4	$                               18,280	$                  73,120	$                                30,880
5	$                               18,280	$                  91,400	$                                12,600
Declining Balance Method
Useful Life		5	Years
Cost		$                  91,250
Residual Value		$                    9,150
Depreciable Value		$                  82,100
Depreciation Rate		40.00%
Year	Depreciation Expenses	Acc Depreciation	Book Value End Of Year
1	$                               36,500	$                  36,500	$                                54,750
2	$                               21,900	$                  58,400	$                                32,850
3	$                               13,140	$                  71,540	$                                19,710
4	$                                 7,884	$                  79,424	$                                11,826
5	$                                 2,676	$                  82,100	$                                  9,150
Units Of Production Method
Useful Life		5	Years
Cost		$                  56,434
Residual Value		$                    6,570
Depreciatiable Value		$                  49,864
Year	Depreciation Expenses	Acc Depreciation	Book Value End Of Year
1	$                                     966	$                        966	$                                55,468
2	$                                 9,453	$                  10,419	$                                46,015
3	$                               12,397	$                  22,816	$                                33,618
4	$                                 9,016	$                  31,832	$                                24,602
5	$                                 9,016	$                  40,848	$                                15,586
6	$                                 9,016		$                                  6,570
Working Note
Year	No Of Units Produced	Depreciation
a	b	c=b/21680*49864
1	$                                     420	$                        966
2	$                                 4,110	$                    9,453
3	$                                 5,390	$                  12,397
4	$                                 3,920	$                    9,016
5	$                                 3,920	$                    9,016
6	$                                 3,920	$                    9,016
TOTAL	$                               21,680	$                  49,864

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