Question

Compute Depreciation Equipment purchased at the beginning of the fiscal year for $3,600,000 is expected to have a useful life of 10 years, or 140,000 operating hours (1st year 13000 hours, 2nd 21000, 3rd 15000, 4th 12000, 5th 9000, 6th 7000, 7th 8000, 15000, 8th 10000, 9th 14000, and 10th 16000). The residual value of the equipment is $100,000. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. Note: Three depreciation schedules must be prepared. straight-line units-of-production declining-balance at twice the straight-line rate

Answer 1

As per SLM Method
Year	Original Cost	Depreciable Cost	Depreciation Expense	Accumulated Depreciation	Ending Book Value
1	3,600,000	3,500,000	350,000	350,000	3,250,000
2	3,600,000	3,500,000	350,000	700,000	2,900,000
3	3,600,000	3,500,000	350,000	1,050,000	2,550,000
4	3,600,000	3,500,000	350,000	1,400,000	2,200,000
5	3,600,000	3,500,000	350,000	1,750,000	1,850,000
6	3,600,000	3,500,000	350,000	2,100,000	1,500,000
7	3,600,000	3,500,000	350,000	2,450,000	1,150,000
8	3,600,000	3,500,000	350,000	2,800,000	800,000
9	3,600,000	3,500,000	350,000	3,150,000	450,000
10	3,600,000	3,500,000	350,000	3,500,000	100,000
SLM=( Original Cost- Salvage Value )/ No. of Year
= (3600000-100000)/10=350000

Unit of Production Method
Year	Original Cost	Depreciable Cost	Depreciation Expense	Accumulated Depreciation	Ending Book Value	Working :-( Cal of Depreciation)
1	3,600,000	3,500,000	325000	325,000.00	3,275,000.00	(3500000/140000)*13000
2	3,600,000	3,500,000	525000	850,000.00	2,750,000.00	(3500000/140000)*21000
3	3,600,000	3,500,000	375000	1,225,000.00	2,375,000.00	(3500000/140000)*15000
4	3,600,000	3,500,000	300000	1,525,000.00	2,075,000.00	(3500000/140000)*12000
5	3,600,000	3,500,000	225000	1,750,000.00	1,850,000.00	(3500000/140000)*9000
6	3,600,000	3,500,000	175000	1,925,000.00	1,675,000.00	(3500000/140000)*7000
7	3,600,000	3,500,000	575000	2,500,000.00	1,100,000.00	(3500000/140000)*23000
8	3,600,000	3,500,000	250000	2,750,000.00	850,000.00	(3500000/140000)*10000
9	3,600,000	3,500,000	350000	3,100,000.00	500,000.00	(3500000/140000)*14000
10	3,600,000	3,500,000	400000	3,500,000.00	100,000.00	(3500000/140000)*16000
Note for th year 2 unit of activity provided , that's why added both the activity.

As per double declinning method
Year	Original Cost	Depreciable Cost	Depreciation Expense	Accumulated Depreciation	Ending Book Value
1	3,600,000	3,600,000.00	720,000.00	720,000.00	2,880,000.00	(Depreciable Cost X 20%)
2	3,600,000	2,880,000.00	576,000.00	1,296,000.00	2,304,000.00
3	3,600,000	2,304,000.00	460,800.00	1,756,800.00	1,843,200.00
4	3,600,000	1,843,200.00	368,640.00	2,125,440.00	1,474,560.00
5	3,600,000	1,474,560.00	294,912.00	2,420,352.00	1,179,648.00
6	3,600,000	1,179,648.00	235,929.60	2,656,281.60	943,718.40
7	3,600,000	943,718.40	188,743.68	2,845,025.28	754,974.72
8	3,600,000	754,974.72	150,994.94	2,996,020.22	603,979.78
9	3,600,000	603,979.78	120,795.96	3,116,816.18	483,183.82
10	3,600,000	483,183.82	96,636.76	3,213,452.94	386,547.06

Rate of Depreciation :=1/10*2= 20%