Req. 1a
Straight Line Method = (Purchase Value - Residual Value)/ Number of Useful Years
=($ 46,500,000-$ 4,500,000)/5
=$ 42,000,000/5
= $ 8,400,000
1.b Units of Production method of Depreciation
Depreciation per mile =(Purchase Value - Residual Value)/ Total miles
=($ 46,500,000-$ 4,500,000)/ 6,000,000
=$ 42,000,000/6,000,000
=$ 7 per mile
Depreciation Expense= $ 7 *1,500,000 =$ 10,500,000
Double Declining Balance method =2*(Purchase Value - Residual Value)/ Number of Useful Years
=2* 20%
=40%
Year | Beginning book value | Depreciation % | Depreciation Expense | Closing Book Value |
1 | $ 46,500,000.00 | 40% | $ 18,600,000.00 | $ 27,900,000.00 |
2 | $ 27,900,000.00 | 40% | $ 11,160,000.00 | $ 16,740,000.00 |
3 | $ 16,740,000.00 | 40% | $ 6,696,000.00 | $ 10,044,000.00 |
Req 2
Dereciation for Three Years Under:
Straight line method =3*8,400,000=25,200,000
Units Of Production Method =3*$ 10,500,000=$ 31,500,000
Book Value After 3 years under
Straight line method =$ 46,500,000- $ 25,200,000=$ 21,300,000
Units Of Production Method = $ 46,500,000- $ 31,500,000= 15,000,000
Double Declining Balance method
Year | Beginning book value | Depreciation % | Depreciation Expense | Closing Book Value |
1 | $ 46,500,000.00 | 40% | $ 18,600,000.00 | $ 27,900,000.00 |
2 | $ 27,900,000.00 | 40% | $ 11,160,000.00 | $ 16,740,000.00 |
3 | $ 16,740,000.00 | 40% | $ 6,696,000.00 | $ 10,044,000.00 |
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