Question

On January 1, 2015, a machine was purchased for $96,300. The machine has an estimated salvage value of $6,420 and an estimated useful life of 5 years. The machine can operate for 107,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 21,400 hrs; 2016, 26,750 hrs; 2017, 16,050 hrs; 2018, 32,100 hrs; and 2019, 10,700 hrs.

Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.) (1) Straight-line Method $ (2) Activity Method Year 2015 $ 2016 $ 2017 $ 2018 $ 2019 $ (3) Sum-of-the-Years'-Digits Method Year 2015 $ 2016 $ 2017 $ 2018 $ 2019 $ (4) Double-Declining-Balance Method Year 2015 $ 2016 $ 2017 $ 2018 $ 2019 $

Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.) Year Straight-line Method Sum-of-the-years'-digits method Double-declining-balance method 2015 $ $ $ 2016 2017 2018 2019 2020

Answer 1

Case 1:When Financial year is Dec 31
Straight Line
Date	Cost of asset	Depreciable cost	Useful life	Depreciation expenses	Accumulated Depreciation	Book value
2015	$96,300	$89,880	5 Years	$17,976	$17,976	$78,324
2016	$96,300	$89,880	5 Years	$17,976	$35,952	$60,348
2017	$96,300	$89,880	5 Years	$17,976	$53,928	$42,372
2018	$96,300	$89,880	5 Years	$17,976	$71,904	$24,396
2019	$96,300	$89,880	5 Years	$17,976	$89,880	$6,420
Activity method
Date	Cost of asset	Depreciation per miles	No. of miles	Depreciation expenses	Accumulated Depreciation	Book value
2015	$96,300	$0.84	21400	$17,976	$17,976	$78,324
2016	$96,300	$0.84	26750	$22,470	$40,446	$55,854
2017	$96,300	$0.84	16050	$13,482	$53,928	$42,372
2018	$96,300	$0.84	32100	$26,964	$80,892	$15,408
2019	$96,300	$0.84	10700	$8,988	$89,880	$6,420
Sum of Year digits method
Date	Cost of asset	Depreciable cost	Remaining Life	Depreciation expenses	Accumulated Depreciation	Book value
2015	$96,300	$89,880	5	$29,960	$29,960	$66,340
2016	$96,300	$89,880	4	$23,968	$53,928	$42,372
2017	$96,300	$89,880	3	$17,976	$71,904	$24,396
2018	$96,300	$89,880	2	$11,984	$83,888	$12,412
2019	$96,300	$89,880	1	$5,992	$89,880	$6,420
			15
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
2015	$96,300	$96,300	40.00%	$38,520	$38,520	$57,780
2016	$96,300	$57,780.00	40.00%	$23,112	$61,632	$34,668
2017	$96,300	$34,668.00	40.00%	$13,867	$75,499	$20,801
2018	$96,300	$20,800.80	40.00%	$8,320	$83,820	$12,480
2019	$96,300	$12,480.48	40.00%	$4,992	$88,812	$7,488
Case 2:When Financial year is Sept 30
Straight Line
Date	Cost of asset	Depreciable cost	Useful life	Depreciation expenses	Accumulated Depreciation	Book value
2015-9 months	$96,300	$89,880	5 Years	$13,482	$13,482	$82,818
2016	$96,300	$89,880	5 Years	$17,976	$31,458	$64,842
2017	$96,300	$89,880	5 Years	$17,976	$49,434	$46,866
2018	$96,300	$89,880	5 Years	$17,976	$67,410	$28,890
2019	$96,300	$89,880	5 Years	$17,976	$85,386	$10,914
2020-3 months	$96,300	$89,880	5 Years	$4,494	$89,880	$6,420
Sum of Year digits method
Date	Cost of asset	Depreciable cost	Remaining Life	Depreciation expenses	Accumulated Depreciation	Book value
2015	$96,300	$89,880	5	$29,960	$29,960	$66,340
2016	$96,300	$89,880	4	$23,968	$53,928	$42,372
2017	$96,300	$89,880	3	$17,976	$71,904	$24,396
2018	$96,300	$89,880	2	$11,984	$83,888	$12,412
2019	$96,300	$89,880	1	$5,992	$89,880	$6,420
			15
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
2015-9 months	$96,300	$96,300	40.00%	$28,890	$28,890	$67,410
2016	$96,300	$67,410.00	40.00%	$26,964	$55,854	$40,446
2017	$96,300	$40,446.00	40.00%	$16,178	$72,032	$24,268
2018	$96,300	$24,267.60	40.00%	$9,707	$81,739	$14,561
2019	$96,300	$14,560.56	40.00%	$5,824	$87,564	$8,736
2020-3 months	$96,300	$8,736.34	40.00%	$874	$88,437	$7,863