Question

Facts: You purchased a piece of equipment on January 1, 2019 for $53,000. It has a $3,000 salvage value and a 5 year useful life. It’s life in units of output is 100,000 hours. Prepare the depreciation schedules for the entire useful life (e.g. You will show all the years for the asset) as follows:

1. Straight line
2. Sum of the year’s digits
3. Units of production (use the following use: yr1: 18,000; yr2: 22,000; yr3: 28,000 yr4: 20,000; yr5: 12,000
4. 200% Declining balance
5. Straight line if on January 1, 2021, you decide you actually have 4 more years of useful life.

Answer 1

Straight line depreciation

Cost= 53,000 salvage value =3,000

Life = 5 years,

Dep per year= (Cost - salvage value)/No of years

= (53,000 - 3,000)/5 years

= 10,000

Depreciation schedule

Year	Book value year start	Depreciation Expenses	Accumulated depreciation	Book Value end
2019	53,000	10,000	10,000	43,000
2020	43,000	10,000	20,000	33,000
2021	33,000	10,000	30,000	23,000
2022	23,000	10,000	40,000	13,000
2023	13,000	10,000	50,000	3,000

Sum of year digit method

Depreciation calculated as on year 1 =( cost-salvage value)× remaining life /total of years of life

Total of life = 5+4+3+2+1= 15

Dep of year 1 = (53,000- 3,000)×5/15

= 16,667

Year 2 = (53,000-3,000)×4/15

= 13,333 and so on

Depreciation schedule

Year	Book value year start	total cost Depreciable	Depreciation percentage	depreciation expense	Accumulated depreciation	Book value year end
2019	53,000	50,000	33%	16,667	16,667	36,333
2020	36,000	50,000	27%	13,333	30,000	23,000
2021	23,000	50,000	20%	10,000	40,000	13,000
2022	13,000	50,000	13%	6,667	46,667	6,333
2023	6,333	50,000	7%	3,333	50,000	3,000

Unit of production Method

Dep = (cost-salvage value)× no of output used in year/total output

Year 1 = (53,000- 3,000)× 18,000/100,000=9,000

Year 2= (53,000-3000)×22,000/100,000=11,000

Year 3= (53,000-3,000)×28,000/100,000=14,000

Year4= (53,000-3,000)×20,000/100,000=10,000

Year 5=(53,000-3,000)×12,000/100,000=6,000

Depreciation schedule

Year	book value year start	Depreciation Expenses	Accumulated depreciation	book value ending
2019	53,000	9,000	9,000	44,000
2020	44,0000	11,000	20,000	33,000
2021	33,000	14,000	34,000	19,000
2022	19,000	10,000	44,000	9,000
2023	9,000	6,000	50,000	3,000

200% declining balance

Dep rate = cost/useful life

= 53,000/5= 10,600

Rate = 10,600×100/53,000

=20%

DDB rate = 20% × 2=40%

Depreciation schedule

Year	book value year start	Depreciation percent	Depreciation expense	Accumulated depreciation	book value year end
2019	53,000	40%	21,200	21,200	31,800
2020	31,800	40%	12,720	33,920	19,080
2021	19,080	40%	7,632	41,552	11,448
2022	11,448	40%	4,579	46,131	6,889
2023	6,869	40%	2,748	48,879	4,121

Book value on Jan 1 2021 as per straight line=33,000

Remaining useful life= 4 years

Dep per year= (33,000- 3,000)/4 years

=7,500

Depreciation schedule

Year	Book value year start	Depreciation Expenses	Accumulated depreciation	book value year end
2019	53,000	10,000	10,000	43,000
2020	43,000	10,000	20,000	33,000
2021	33,000	7,500	27,500	25,500
2022	25,500	7,500	35,000	18,000
2023	18,000	7,500	42,500	10,500
2024	10,500	7,500	50,000	3,000