Question

Question 1 In recent years, Sandhill Corporation has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine Acquired Cost Residual Value Useful Life (in years) Depreciation Method 1 Jan. 1, 2018 $104,000 $12,600 5 Straight-line 2 July 1, 2019 91,250 9,150 5 Diminishing-balance 3 Nov. 1, 2019 56,434 6,570 6 Units-of-production For the diminishing-balance method, Sandhill Corporation uses double the straight-line rate. For the units-of-production method, total machine hours are expected to be 21,680. Actual hours of use in the first 3 years were: 2019, 420; 2020, 4,110; and 2021, 5,390. Machine 2: Diminishing-balance depreciation Calculation End of Year Year Carrying Amount Beg. of Year Depreciation Rate # of months Depreciation Expense Accumulated Depreciation Carrying Amount 2019 $ % 3/126/129/1212/12 $ $ $ 2020 % 6/1212/123/129/12 2021 % 9/1212/123/126/12 2022 % 3/129/1212/126/12 2023 % 3/126/129/1212/12

Answer 1

1)

Machine 2: Under Diminishing Balance Method:

Depreciation Rate under Diminishing Balance method = 1 / Number of Year of service * 2

= 1/ 5 Years * 2

= 40%

Depreciation Schedule under Diminishing Balance Method:

		Calculation			End of Year
Year	Carrying Amount of Beg. Of Year (a)	Depreciation Rate (b)	# of months (c )	Depreciation Expense (d = a*b*c)	Accumulated Depreciation (e = d + d)	Carrying Amount (a - d)
2019	$91,250	40%	6/12.	$18,250	$18,250	$73,000
2020	$73,000	40%	12/12.	$29,200	$47,450	$43,800
2021	$43,800	40%	12/12.	$17,520	$64,970	$26,280
2022	$26,280	40%	12/12.	$10,512	$75,482	$15,768
2023	$15,768	40%	12/12.	$6,307.20	$81,789.20	$9,461

Note: As requested, the depreciation schedule is prepared only for Machine 2 under double declining balance method. Please comment, if you need the schedules for remaining two machines.