On January 1, 2015, a machine was purchased for $101,700. The machine has an estimated salvage...
On January 1, 2015, a machine was purchased for $101,700. The machine has an estimated salvage value of $6,780 and an estimated useful life of 5 years. The machine can operate for 113,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 22,600 hrs; 2016, 28,250 hrs; 2017, 16,950 hrs; 2018, 33,900 hrs; and 2019, 11,300 hrs.Please show calculations for all problems below.
1) Compute the annual depreciation charges over the machine's life assuming a December 31 year-end for each of the following depreciation methods:
a) Straight-Line Method $___
b) Activity Method
2015 $__ 2016 $__ 2017 $__ 2018 $__ 2019 $__
c) Sum-of-the-Years' Digits Method
2015 $__ 2016 $__ 2017 $__ 2018 $__ 2019 $__
d) Double-Declining-Balance Method
2015 $__ 2016 $__ 2017 $__ 2018 $__ 2019 $__
2) Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following method:
Year Straight-Line Method Sum-of-the-years-digits Method Double-declining Method
2015 $__ $__ $__
2016 $__ $__ $__
2017 $__ $__ $__
2018 $__ $__ $__
2019 $__ $__ $__
2020 $__ $__ $__
Homework Answers
Answer 1:
Table 1:
| Depreciation | SLM | Activity method | Sum of years' digit method | Double declining balance method |
| 2015 | $ 18,984.00 | $ 18,984.00 | $ 31,640.00 | $ 40,680.00 |
| 2016 | $ 18,984.00 | $ 23,730.00 | $ 25,312.00 | $ 24,408.00 |
| 2017 | $ 18,984.00 | $ 14,238.00 | $ 18,984.00 | $ 14,644.80 |
| 2018 | $ 18,984.00 | $ 28,476.00 | $ 12,656.00 | $ 8,786.88 |
| 2019 | $ 18,984.00 | $ 9,492.00 | $ 6,328.00 | $ 5,272.13 |
| Total | $ 94,920.00 | $ 94,920.00 | $ 94,920.00 | $ 93,791.81 |
Answer 2:
Table 2:
| Depreciation | SLM | Sum of years' digit method | Double declining balance method |
| 30-Sep-15 | $ 9,492.00 | $ 15,820.00 | $ 20,340.00 |
| 30-Sep-16 | $ 18,984.00 | $ 28,476.00 | $ 32,544.00 |
| 30-Sep-17 | $ 18,984.00 | $ 22,148.00 | $ 19,526.40 |
| 30-Sep-18 | $ 18,984.00 | $ 15,820.00 | $ 11,715.84 |
| 30-Sep-19 | $ 18,984.00 | $ 9,492.00 | $ 7,029.50 |
| 30-Sep-20 | $ 9,492.00 | $ 3,164.00 | $ 2,636.06 |
| Total | $ 94,920.00 | $ 94,920.00 | $ 93,791.80 |
Working note (Table 3): Values for Table 2
| Depreciation | SLM | Sum of years' digit method | Double declining balance method |
| 01-Jan-15 to 30-Sep-15 | $ 9,492.00 | $ 15,820.00 | $ 20,340.00 |
| 01-Oct-15 to 31-Dec-15 | $ 9,492.00 | $ 15,820.00 | $ 20,340.00 |
| 01-Jan-16 to 30-Sep-16 | $ 9,492.00 | $ 12,656.00 | $ 12,204.00 |
| 01-Oct-16 to 31-Dec-16 | $ 9,492.00 | $ 12,656.00 | $ 12,204.00 |
| 01-Jan-17 to 30-Sep-17 | $ 9,492.00 | $ 9,492.00 | $ 7,322.40 |
| 01-Oct-17 to 31-Dec-17 | $ 9,492.00 | $ 9,492.00 | $ 7,322.40 |
| 01-Jan-18 to 30-Sep-18 | $ 9,492.00 | $ 6,328.00 | $ 4,393.44 |
| 01-Oct-18 to 31-Dec-18 | $ 9,492.00 | $ 6,328.00 | $ 4,393.44 |
| 01-Jan-19 to 30-Sep-19 | $ 9,492.00 | $ 3,164.00 | $ 2,636.06 |
| 01-Oct-19 to 31-Dec-19 | $ 9,492.00 | $ 3,164.00 | $ 2,636.06 |
| Total | $ 94,920.00 | $ 94,920.00 | $ 93,791.81 |
Formulae for Table 1:
| Depreciation | SLM | Activity method | Sum of years' digit method | Double declining balance method |
| 2015 | =(101700-6780)/5 | =(101700-6780)/113000*22600 | =(101700-6780)/15*5 | =101700*40% |
| 2016 | =(101700-6780)/5 | =(101700-6780)/113000*28250 | =(101700-6780)/15*4 | =101700*60%*40% |
| 2017 | =(101700-6780)/5 | =(101700-6780)/113000*16950 | =(101700-6780)/15*3 | =101700*60%*60%*40% |
| 2018 | =(101700-6780)/5 | =(101700-6780)/113000*33900 | =(101700-6780)/15*2 | =101700*60%*60%*60%*40% |
| 2019 | =(101700-6780)/5 | =(101700-6780)/113000*11300 | =(101700-6780)/15*1 | =101700*60%*60%*60%*60%*40% |
Formulae for Table 2:
| Depreciation | SLM | Sum of years' digit method | Double declining balance method |
| 30-09-2015 | 9492 | 15820 | 20340 |
| 30-09-2016 | =9492+9492 | =15820+12656 | =20340+12204 |
| 30-09-2017 | =9492+9492 | =12656+9492 | =12204+7322.4 |
| 30-09-2018 | =9492+9492 | =9492+6328 | =7322.4+4393.44 |
| 30-09-2019 | =9492+9492 | =6328+3164 | =4393.44+2636.06 |
| 30-09-2020 | 9492 | 3164 | =2636.06 |
Formulae for Table 3:
| Depreciation | SLM | Sum of years' digit method | Double declining balance method |
| 01-Jan-15 to 30-Sep-15 | =((101700-6780)/5)/2 | =((101700-6780)/15*5)/2 | =(101700*40%)/2 |
| 01-Oct-15 to 31-Dec-15 | =((101700-6780)/5)/2 | =((101700-6780)/15*5)/2 | =(101700*40%)/2 |
| 01-Jan-16 to 30-Sep-16 | =((101700-6780)/5)/2 | =((101700-6780)/15*4)/2 | =(101700*60%*40%)/2 |
| 01-Oct-16 to 31-Dec-16 | =((101700-6780)/5)/2 | =((101700-6780)/15*4)/2 | =(101700*60%*40%)/2 |
| 01-Jan-17 to 30-Sep-17 | =((101700-6780)/5)/2 | =((101700-6780)/15*3)/2 | =(101700*60%*60%*40%)/2 |
| 01-Oct-17 to 31-Dec-17 | =((101700-6780)/5)/2 | =((101700-6780)/15*3)/2 | =(101700*60%*60%*40%)/2 |
| 01-Jan-18 to 30-Sep-18 | =((101700-6780)/5)/2 | =((101700-6780)/15*2)/2 | =(101700*60%*60%*60%*40%)/2 |
| 01-Oct-18 to 31-Dec-18 | =((101700-6780)/5)/2 | =((101700-6780)/15*2)/2 | =(101700*60%*60%*60%*40%)/2 |
| 01-Jan-19 to 30-Sep-19 | =((101700-6780)/5)/2 | =((101700-6780)/15*1)/2 | =(101700*60%*60%*60%*60%*40%)/2 |
| 01-Oct-19 to 31-Dec-19 | =((101700-6780)/5)/2 | =((101700-6780)/15*1)/2 | =(101700*60%*60%*60%*60%*40%)/2 |
In case of any doubt, please comment.
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