Question

On January 1. 2014. a machine was purchased for $90,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 5 years. The machine can operate for 100.000 hours before it needs to be replaced. The company closed its books on December 31 of each year.

 Instructions 

(a) Compute the annual depreciation charges over the machine' s life assuming a December 31 year-end for each of the following depreciation rnethods.

    (l) Straight-line method. (2) Sum-of-the-years'-digits method. . (3) Double-declining-balance method. 

(b) Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset's life applying each of the following methods. 

   (l) Straight-line method. (2) Double-declining-balance method. (3) Sum-of-the-years' -digits method.

Answer 1

A) 1.
Straight line Method
Year	Opening Balance	Depreciation	Closing Balance
1	90000	16800	73200
2	73200	16800	56400
3	56400	16800	39600
4	39600	16800	22800
5	22800	16800	6000
B). 1
Straight line Method
Year	Opening Balance	Depreciation	Closing Balance
1  (9 Months)	90000	12600	77400
2	77400	16800	60600
3	60600	16800	43800
4	43800	16800	27000
5	27000	16800	10200
6 (3 Months)	10200	4200	6000

 

 

A ) 2. Double Declining Balance Method
Year	Opening Balance	Depreciation	Closing Balance
1	90000	36000	54000
2	54000	21600	32400
3	32400	12960	19440
4	19440	7776	11664
5	11664	5664	6000
		Residual value	6000
B.) 2
Double Declining Balance Method
Year	Opening Balance	Depreciation	Closing Balance
1(9 months)	90000	27000	63000
2	63000	25200	37800
3	37800	15120	22680
4	22680	9072	13608
5	13608	5443.2	8164.8
6(3 Months)	8164.8	2164.8	6000
		Residual value	6000

A).3

Sum of years digits method
Year	Opening Balance	Depreciation	Closing Balance
1	90000	28000	56000
2	56000	22400	33600
3	33600	16800	16800
4	16800	11200	5600
5	5600	5600	0
		Residual Value	6000

 B.) 3

 

Sum of years digits method
Year	Opening Balance	Depreciation	Closing Balance
1	90000	21000	63000
2	63000	23800	39200
3	39200	18200	21000
4	21000	12600	8400
5	8400	7000	1400
6	1400	1400	0
		Residual Value	6000