Question

DEPRECIATION METHODS Ten O'Clock, Inc. purchased a vanon Lamar 2018 for SA0000. Estimated life of the van was live years, and its estimated residual value was $90.000. Ten O'Clock uses the straight-line method of depreciation. Prepare the depreciation schedule. Depreciation Expense Book Value at End of Year 2018 2019 2018 2019 Method Straight-line On January 1, 2019, Sapphire Manufacturing Corporation purchased a machine for $10,000,000. The corporation expects to use the machine for 24,000 hours over the next six years. The estimated residual value of the machine at the end of the sixth year is $40,000. The schedule of usage of the machine is below. Year Usage 4100 6,000 5,200 10 2.000 2.000 Prepare the depreciation schedule using the units-of-production method of depreciation. Depreciation Expense 2019 2020 Book Value at End of Year 2019 2020 Method Units-of-production The cost of an asset purchased on 1/1/2019 is $10,000,000, and its residual value is $100,000. Estimated useful life of the asset is four years. Prepare the schedule of depreciation using the double-declining. balance method of accounting Depreciation Expense Book Value at End of Year 2019 2020 2019 2020 Method Double-declining-balance

Answer 1

Ans. A		Depreciation Expense		Book value at end of year
	Method
	$https://data.adxcel-ec2.com/pixel/?ad_log=referer&action=content&pixid=654d86b8-456f-4028-8abf-c74c28939b40,https://data.adxcel-ec2.com/pixel/?ad_log=referer&action=content&pixid=654d86b8-456f-4028-8abf-c74c28939b40$ Straight - line	$142,000	$142,000	$658,000	$516,000
	*Calculations:
	Straight line depreciation = (Cost of asset - Residual value) / Useful life in years
	($800,000 - $90,000) / 5
	$710,000 / 5
	$142,000
	*In Straight line method the depreciation is equal in each year.
	Year	Depreciation	Accumulated depreciation	Net book value
	1	$142,000	$142,000	$658,000
	2	$142,000	$284,000	$516,000
	Accumulated depreciation = Current year depreciation + Total of Previous year's depreciations
	*Net book value = Cost of asset - Accumulated depreciation
Ans. 2		Depreciation Expense		Book value at end of year
	Method	2019	2020	2019	2020
	Units of production	$7,492,500	$9,990,000	$32,507,500	$22,517,500
	Units of production depreciation =
	Depreciation per unit =   (Cost of asset - Residual value) / Expected activity
	($40,000,000 - $40,000) / 24,000
	$39,960,000/ 24,000
	$1,665.00	per unit
	Depreciation = Activity*Depreciation per unit
Year	Depreciation per unit (a)	Usage (b)	Depreciation (a*b)	Accumulated depreciation	Net book value
2019	$1,665.00	4500	$7,492,500	$7,492,500	$32,507,500
2020	$1,665.00	6000	$9,990,000	$17,482,500	$22,517,500
	*Accumulated depreciation and net book value are calculated same as above in calculation 1 (Straight line method).
Ans. 3		Depreciation Expense		Book value at end of year
	Method	2019	2020	2019	2020
	Double declining balance	$5,000,000	$2,500,000	$5,000,000	$2,500,000
	Double declining balance method:
	Double declining balance depreciation rate = 2 * 1 / life of assets
		2 * 1 / 4
		0.50
	*Depreciation = Remaining value at the beginning of the year * Double declining balance depreciation rate
	Year	Value at the beginning (a)	Depreciation (b = a*0.50)	Accumulated depreciation	Net book value (a - b)
	2019	$10,000,000	$5,000,000	$5,000,000	$5,000,000
	2020	$5,000,000	$2,500,000	$7,500,000	$2,500,000