Question

1. (12 points) Robert Parish Corporation purchased a new machine for its assembly process on January 1, 2014. The cost of this machine was $117,900. The company estimated that the machine would have a salvage value of $17,900 at the end of its service life. Its life is estimated at 4 years, and its working hours are estimated at 10,000 hours. Year-end is December 31. Instructions Compute the depreciation expense under the following methods and complete the depreciation schedules below. (a) Straight-line depreciation. (1) Activity method for 2014 and 2015, assuming that machine usage was 2,000 hours for 2014; 1,710 hours for 2015; 3,150 hours for 2016 and 3,140 hours for 2017. (c) Sum-of-the-years'-digits. (d) Double-declining-balance. Straight-line Year Book Value, Beginning Accumulated Depreciation Depreciation Expense Book Value, Ending -Cost - AVD I depr exp. Units-of-Production (Activity) Year Book Value, Beginning Depreciation Accumulated Depreciation Book Value, Ending Cost-A/0 led States) Focus

Answer 1

SOLUTION 1 (A)
	CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR MACHINE
	Purchase Cost of Machine	1,17,900
	Less: Salvage Value	17,900
	Net Value for Depreciation	1,00,000
	Usefule life of the Assets	4 years
	Depreciation per year = Value for Depreciation / 4 years =	25,000
	Total Depreciation for the per year	25,000
	DEPRECIATION SCHEDULE - STRAIGHT LINE METHOD
		Income Statement
	Year	Cost	Book Value Beginning	Depreciation	Accumulation Depreciation	Book Value
	At Acquisition	$                  1,17,900				$              1,17,900
	Depreciation for Year 1		$               1,17,900	$              25,000	$                       25,000	$                  92,900
	Depreciation for Year 2		$                  92,900	$              25,000	$                       50,000	$                  67,900
	Depreciation for Year 3		$                  67,900	$              25,000	$                       75,000	$                  42,900
	Depreciation for Year 4		$                  42,900	$              25,000	$                   1,00,000	$                  17,900
SOLUTION 1 (B)
	CALCULATION OF THE DEPRECIATION AS PER UOP METHOD
	Purchase Cost of Equipment =		$               1,17,900
	Less: Salvage Value =		$                  17,900
	Net Value for Depreciation =		$               1,00,000
	Expected to Produce Units=		$                  10,000	Hours
	Depreciation per unit =		$                     10.00	Per Hours
	($ 100,000 / 10,000Hours)
	DEPRECIATION SCHEDULE - UNIT OF PRODUCTION METHOD
	Year	Cost	Book Value Beginning	Depreciation Expenses	Accumulation Depreciation	Book Value
	At Acquisition	$                  1,17,900				$              1,17,900
	Depreciation for Year 1 (2000 Hrs X $ 10)		$               1,17,900	$              20,000	$                       20,000	$                  97,900
	Depreciation for Year 2 (1710 Hrs X $ 10)		$                  97,900	$              17,100	$                       37,100	$                  80,800
	Depreciation for Year 3 (3150 Hrs X $ 10)		$                  80,800	$              31,500	$                       68,600	$                  49,300
	Depreciation for Year 4 (3140 Hrs X $ 10)		$                  49,300	$              31,400	$                   1,00,000	$                  17,900
SOLUTION 1 (C)
	CALCULATION OF THE DEPRECIATION AS PER SUM OF DIGITS METHOD
	Purchase Cost of Machine	$                  1,17,900
	Less: Salvage Value	$                     17,900
	Net Value for Depreciation	$                  1,00,000
	SUM OF DIGITS = 1+2+3+4 = 10
	DEPRECIATION SCHEDULE - SUM OF YEAR DIGIST METHODS
	Year	Cost	Book Value Beginning	Depreciation Expenses	Accumulation Depreciation	Book Value
	At Acquisition	$                  1,17,900				$              1,17,900
	Depreciation for Year 1 ($ 100,000 x 4/10 )		$               1,17,900	$              40,000	$                       40,000	$                  77,900
	Depreciation for Year 2 ($ 100,000 x 3/10 )		$                  77,900	$              30,000	$                       70,000	$                  47,900
	Depreciation for Year 3 ($ 100,000 x 2/10 )		$                  47,900	$              20,000	$                       90,000	$                  27,900
	Depreciation for Year 4 ($ 100,000 x 1/10 )		$                  27,900	$              10,000	$                   1,00,000	$                  17,900
SOLUTION 1 (D)
	CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD FOR MACHINE C
	Rate of Depreciation =
	Rate of Depreciation = (1 / 4 Years )	0.25 or 25.00%
	(Depreication / Purchase price )
	Double decline deprection rate = 25% * 2 =	50.0%
	Years	Book Value / Beginning value	Depreciation @ 50%	Closing Value
	Year 1	1,17,900	58,950	58,950
	Year 2	58,950	29,475	29,475
	Year 3	29,475	14,738	14,738
	Year 4	14,738	7,369	7,369
	DEPRECIATION SCHEDULE - DOUBLE DECLINE BALANCE
	Year	Cost	Book Value beginning	Depreciation Expenses	Accumulation Depreciation	Book Value
	At Acquisition	$                  1,17,900				$              1,17,900
	Depreciation for Year 1		$               1,17,900	$              58,950	$                       58,950	$                  58,950
	Depreciation for Year 2		$                  58,950	$              29,475	$                       88,425	$                  29,475
	Depreciation for Year 3		$                  29,475	$              14,738	$                   1,03,163	$                  14,738
	Depreciation for Year 4		$                  14,738	$                7,369	$                   1,10,531	$                    7,369