Question

(b) Harrison Company purchased a piece of machinery for $100,000 on 1 July 2017. The residual value is $20,000 and the expected useful life is 8 years. Compute the depreciation expense and net book value of the machinery for the years 2017, 2018 and 2019 using: Straight line method. (11) Double declining balance method. 12

Harrison Company purchased a piece of machinery for $100,000 on 1 July 2017. The residual value is $20,000 and the expected useful life is 8 years.
Compute the depreciation expense and net book value of the machinery for the years 2017, 2018, and 2019 using:
(i) Straight-line method.
(ii) Double declining balance method.

Answer 1

Cost of Machinery Residual Value Useful life $1,00,000 $ 20,000 8 years Requirement 1: 1. Straight Line Method Depreciation (Cost - Salvage Value) / life ($ 100,000 - $ 10,000) / 8 $ 90,000 /8 $ 11,250 per year Depreciation for the year Depreciable Cost Useful life Date Assets cost 1-1-18$ 1,00,000 2017 (HALF YEAR) 2018 2019 8 Accumulated Depreciation Depreciation Book Value $ 1,00,000 $ 5,625 $ 5,625 $ 94,375 $ 11,250 $ 16,875 $ 83,125 $ 11,250 $ 28,125 $ 71,875 $ $ $ 90,000 90,000 90,000 / / / 2.Double Declining method Rate of Depreciation 2/life x 100 = 2/8 x 100 25% Depreciation for the year Book Value DDB Rate Date Assets cost 2017 $ 1,00,000 2017 (HALF YEAR) 2018 2019 $ $ $ х Depreciation Accumulated Expense Depreciation Book Value $ 1,00,000 $ 12,500 $ 12,500 $ 87,500 $ 21,875 $ 34,375 $ 65,625 $ 16,406 $ 50,781 $ 49,219 1,00,000 87,500 65,625 12.5% 25.0% 25.0% х х Straight Line method Double decline Balance Method Year 2017 2018 2019 Depreciation Expense $ 5,625 $ $ 11,250 $ $ 11,250 $ Net Book Value Depreciation Expense 94,375$ 12,500 $ 83,125$ 21,875 $ 71,875$ 16,406 $ Net Book Value 87,500 65,625 49,219

In case of any doubts or issues, please do comment below