Question

320,000 320N 43. Cirrus Ltd. purchased a new rus Ltd. purchased a new machine on April 1, 2018 at a cost of $720,000. The company estimated that the machine would have a residual value of $72,000 with a four- year life. The company has a December 31 year end. A. Complete the deprecation schedule assuming the company uses the straight-line method (20 marks) 720,000 - 72000 1400 Dec 31 Carrying Amount -162 January 1 Carrying Amount Depreciation Expense Accumulated Depreciation Period 2018 162000 162uor 2019 2020 162.000 2021 162 000 162000 2022 B. Complete the depreciation schedule assuming the company uses the double- diminishing balance method (20 marks) as January 1 Carrying Amount Depreciation Expense Accumulated Depreciation Dec 31 Carrying Amount Period 2018 720.000 os 2019 2020 2021 2022

Answer 1

Requirement A:

Period	January 1 Carrying Amount	Depreciation Expense	Accumulated Depreciation	Dec 31 Carrying Amount
2018	$720,000	$121,500	$121,500	$598,500
2019	$598,500	$162,000	$283,500	$436,500
2020	$436,500	$162,000	$445,500	$274,500
2021	$274,500	$162,000	$607,500	$112,500
2022	$112,500	$40,500	$648,000	$72,000

Calculations:

i. Depreciation Expense:

Depreciation expense = (Cost - Salvage value) ÷ Useful life = ($720,000-$72,000)/4 = $648,000/4 = $162,000

Depreciation expense for 2018 [Apr. to Dec.] = $162,000 x 9/12 = $121,500

Depreciation expense for 2022 [Jan. to Mar.] = $162,000 x 3/12 = $40,500

ii. Accumulate depreciation = Cumulative of Depreciation expense

iii.Dec 31 Carrying amount = Jan 1 carrying amount - Depreciation expense

Requirement B:

Period	January 1 Carrying Amount	Depreciation Expense	Accumulated Depreciation	Dec 31 Carrying Amount
2018	$720,000	$270,000	$270,000	$450,000
2019	$450,000	$225,000	$495,000	$225,000
2020	$225,000	$112,500	$607,500	$112,500
2021	$112,500	$40,500	$648,000	$72,000
2022

Calculations:

i. Depreciation expense:

Depreciation Rate = (100% ÷ 4 years) x 2 = 25% x 2 = 50%

Depreciation expense = January 1 carrying amount x Depreciation Rate

Depreciation expense for 2018 [Apr. to Dec.] = $720,000 x 50% x 9/12 = $360,000 x 9/12 = $270,000

Depreciation expense for 2021 = Dec 31,2020 carrying amount - Salvage value = $112,500-$72,000 = $40,500

ii. Accumulate depreciation = Cumulative of Depreciation expense

iii.Dec 31 Carrying amount = Jan 1 carrying amount - Depreciation expense