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.

Your answer is partially correct. Try again. 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 o decimal places, e.g. 45,892.) Year Straight-line Method Sum-of-the-years'-digits method Double-declining-balance method 2015 13482 29960 28890 2016 17976 23968 26964 2017 17976 17976 16178 DIRTUE 2018 17976 11984 9707 2019 17976 5992 5824 2020 4494 † 874 Click if you would like to Show Work for this question: Open Show Work

Answer 1

Machine is purchased on 1st January 2015

Cost of the machine = $ 96,300

Salvage value =6420

Useful life = 5 years

Year end is 30th September

Straight line method of depreciation-

Depreciation for each year =( Cost - salvage value) / life

= ( 96,300 - 6420 ) / 5

=$ 17,976

Year end 30th September	Months of usage	Calculations	Depreciation amount
2015	9 months	(17,976 * 9 ) / 12	13,482
2016	12 months	17,976*1	17,976
2017	12 months	17976*1	17,976
2018	12 months	17,976*1	17,976
2019	12 months	17,976*1	17,976
2020	3 months	(17,976*3)/12	4,494

Sum of years digit method :

Sum of digits = n(n+1) / 2

= 5(6)/2

= 15 years

Depreciation base = cost - salvage value

= 96,300 - 6,420

= 89,880

Depreciation for 1st year	(89,880)*5/15 = 29,960
Depreciation for 2nd year	(89,880)*4/15 = 23,968
Depreciation for 3rd year	(89,880)*3/15 = 17,976
Depreciation for 4th year	(89,880)*2/15 = 11,984
Depreciation for 5th year	(89,880)*1/15 = 5,992

Depreciation apportionment-

Year	2015	2016	2017	2018	2019	2020
1st year	(29,960)9/12 =22,470	(29,960)3/12 = 7,490
2nd year		(23,968 ) 9/12 = 17,976	(23,968)3/12 =5,992
3rd year			(17,976)9/12 =13,482	(17,976)3/12 =4,494
4th year				(11,984)9/12 =8,988	(11,984)3/12 =2,996
5th year					(5,992)9/12 =4,494	(5,992)3/12 =1,498
Total depreciation for the year	22,470	25,466	19,474	13,482	7,490	1,498

Double declining balance method-

Depreciation rate = (100/5)*2

= 40%

Year	Book value @ the beginning (A)	Calculation	Depreciation amount (B)	Book value at the year end (A - B = C )
2015	96,300	96,300*40%(9/12)	28,890	64,410
2016	67,410	67,410*40%	26,964	40,446
2017	40,446	40,446*40%	16,178	24,268
2018	24,268	24,268*40%	9,707	14560
2019	14,560	14560*40%	5,824	8,736
2020	8736	8736-6420	2316	0

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