Question

At the beginning of the fiscal year. Hughes Rental Service buys a new machine for $136,500. The ne has an estimated life of ten years (870,000 units) and an estimated salvage value of $24,000. Instructions: Using the following three methods, calculate for the first five years depreciation of the machine, the accumulated depreciation at the end of each year, and the ending book value of the machine for each year (round answers to the nearest dollar). Straight-line method Double-declining-balance method 3. Units-of-production method (year 1- 168,000 units, year 2- 143,000 units, year 3- 75,000, year 4- 89,000, and year 5- 113,250 units)

Answer 1

Requirement 1

Straight line Method
A	Cost	$ 136,500
B	Residual Value	$ 24,000
C=A - B	Depreciable base	$ 112,500
D	Life [in years left ]	10
E=C/D	Annual SLM depreciation	$ 11,250

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 136,500	$ 11,250	$ 11,250	$ 125,250
2	$ 125,250	$ 11,250	$ 22,500	$ 114,000
3	$ 114,000	$ 11,250	$ 33,750	$ 102,750
4	$ 102,750	$ 11,250	$ 45,000	$ 91,500
5	$ 91,500	$ 2,813	$ 47,813	$ 88,688

Requirement 2

Double declining Method
A	Cost	$ 136,500
B	Residual Value	$ 24,000
C=A - B	Depreciable base	$ 112,500
D	Life [in years]	10
E=C/D	Annual SLM depreciation	$ 11,250
F=E/C	SLM Rate	10.00%
G=F x 2	DDB Rate	20.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 136,500	20.00%	$ 27,300	$ 27,300	$ 109,200
2	$ 109,200	20.00%	$ 21,840	$ 49,140	$ 87,360
3	$ 87,360	20.00%	$ 17,472	$ 66,612	$ 69,888
4	$ 69,888	20.00%	$ 13,978	$ 80,590	$ 55,910
5	$ 55,910	20.00%	$ 11,182	$ 91,772	$ 44,728

Requirement 3

Units of Production method
A	Cost	$ 136,500
B	Residual Value	$ 24,000
C=A - B	Depreciable base	$ 112,500
D	Usage in units(in Hours)	870000
E	Depreciation per hour	$                        0.13

.

Depreciation schedule-Units of Activity
Year	Book Value	Usage	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$              136,500	168000	$               21,724	$                  114,776	$            21,724
2	$              114,776	143000	$               18,491	$                    96,284	$            40,216
3	$                96,284	75000	$                 9,698	$                    86,586	$            49,914
4	$                86,586	89000	$               11,509	$                    75,078	$            61,422
5	$                75,078	113250	$               14,644	$                    60,433	$            76,067