machine 1:
cost 76,000
salvage value 6,000
useful life 10 years
purchased 7/1/16
machine 2:
cost 80,000
salvage value 10,000
useful life 8 years
purchased 1/1/13
machine 3:
cost 78,000
salvage value 6,000
useful life 6 years = 24,000 hours
purchased 1/1/18
1.
Depreciation on Machine 1:
Depreciation = (Purchase price - Salvage value) / Useful life of asset
Depreciation = (76000 - 6000) / 10
Depreciation = $7000
Depreciation for 2016 will be taken half yearly as machine is purchased on 1 July 2016.
Thus, depreciation for 2016 be $3500 and for remaining years its $7000.
Accumulated depreciation 2016 = $3500
Accumulated depreciation 2017 = $3500+7000 = $10500
Accumulated depreciation 2018 = 10500+ 7000= $17500
Accumulated depreciation 2019 = 17500+7000 = $24500
Accumulated depreciation 2019 = 24500+7000= $31500
Accumulated depreciation 2020 = 31500+7000 = $38500
Depreciation under straight line method will be same for each year till useful life of asset i.e., $7000.
Depreciation on Machine 2:
Depreciation rate = 2*(Cost of machine / Useful life )/Cost of machine * 100
Depreciation rate = 2 * (80000 / 8) / 80000 * 100
Depreciation rate = 25%
Year | Book value at beginning | Depreciation rate | Depreciation expense | Accumulated depreciation | Book value at the end |
A | B | C | D | E | F |
2013 | 80000 | 25% | 20000 | 20000 | 60000 |
2014 | 60000 | 25% | 15000 | 35000 | 45000 |
2015 | 45000 | 25% | 11250 | 46250 | 33750 |
2016 | 33750 | 25% | 8438 | 54688 | 25313 |
2017 | 25313 | 25% | 6328 | 61016 | 18984 |
2018 | 18984 | 25% | 4746 | 65762 | 14238 |
2019 | 14238 | 25% | 3560 | 69321 | 10679 |
2020 | 10679 | 25% | 2670 | 71991 | 8009 |
Depreciation on Machine 3:
Year | Book value at beginning | Salvage value | Depreciation expense | Accumulated depreciation | Book value at the end |
A | B | C | D | E | F |
(B-C)/Total hours * hours used | B-D | ||||
2018 | 78000 | 6000 | (78000-6000)/24000 * 1000 = 3000 | 3000 | 75000 |
2.
Prepare the journal entry for all the 3 machines as follows:
Date | Particulars | Debit | Credit |
Machine 1: | |||
31.12.2020 | Depreciation expense | 7000 | |
Accumulated depreciation | 7000 | ||
Machine 2: | |||
31.12.2020 | Depreciation expense | 2670 | |
Accumulated depreciation | 2670 |
Machine 3:
Actual machine hours for Year 3 is not provided in the question.
machine 1: cost 76,000 salvage value 6,000 useful life 10 years purchased 7/1/16 machine 2: cost...
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