Answer:
Under the straight line method, depreciation is calculated by the following formula: |
Depreciation = Cost - Residual value / Useful life |
Cost = $147000, Residual value = $15000, useful life = 5 |
Depreciation = ($147000 - $15000) / 5 = $26,400 |
Under straight line method, depreciation remains the same for every year. |
So annual depreciation for all five years is same i.e. $26,400 per year |
CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD | |
Purchase Cost of Machine | 147000 |
Useful Life = | 5 years |
Depreciation per year = | 29400 |
(Purchase price / Useful life) | |
CALCULATION OF THE RATE OF DEPRECIATION | |
Rate of Depreciation = | 29400/147000 |
(Depreication / Purchase price ) | |
Rate of Depreciation = | 0.20 or 20% |
Double decline deprection rate = 20% * 2 = | 40% |
Purchase price = | 1,47,000 |
Depreciation for the year 2021 @ 40% = | 58,800 |
Closing balance for the year 2021 | 88,200 |
Opening Balance for the year 2021 | 88,200 |
Depreciation for the year 2022 @40% = | 35,280 |
Closing balance for the year 2022 | 52,920 |
Opening Balance for the year 2022 | 52,920 |
Depreciation for the year 2023 @40% = | 21,168 |
Closing balance for the year 2023 | 31,752 |
Opening Balance for the year 2023 | 31,752 |
Depreciation for the year 2024 @40% = | 12,701 |
Closing balance for the year 2024 | 19,051 |
Opening Balance for the year 2024 | 19,051 |
Depreciation for the year 2025 @40% = | 7,620 |
Closing balance for the year 2025 | 11,431 |
ANSWER = | |
YEAR | DEPRECIATION |
Year 2021 | 58,800 |
Year 2022 | 35,280 |
Year 2023 | 21,168 |
Year 2024 | 12,701 |
Year 2025 | 7,620 |
Depreciation expense per mile = ( Cost of van - residual value)/ Estimated miles | ||
= (147,000-15,000)/440,000 | ||
= $0.3 | ||
Year | Miles | Depreciation |
2021 | 50,000 | 50,000 x 0.3 = 15,000 |
2022 | 66,000 | 66,000 x 0.3 = 19,800 |
2023 | 54,000 | 54,000 x 0.3 = 16,200 |
2024 | 40,000 | 40,000 x 0.3 = 12,000 |
2025 | 43,000 | 43,000 x 0.3 = 12,900 |
Total | $75,900 |
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