Question

On October 1, 2018, the Allegheny Corporation purchased machinery for $157,000. The estimated service life of the machinery is 10 years and the estimated residual value is $3,000. The machine is expected to produce 350,000 units during its life. Required: Calculate depreciation for 2018 and 2019 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. 1. Straight line. 2. Sum-of-the-years'-digits. 3. Double-declining balance. 4. One hundred fifty percent declining balance. 5. Units of production (units produced in 2018, 14,000; units produced in 2019, 29,000). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Calculate depreciation for 2018 and 2019 using straight line method. Partial-year depreciation is calculated based on the number of months the asset is in service. Straight-Line Depreciation 1 Choose Denominator: Choose Numerator: Annual Depreciation Annual Depreciation = Year Annual Depreciation Fraction of Year = Depreciation Expense 2018 2019 < Required 1 Required 2 >

Answer 1

1. Straight line method.

>> Depreciable asset = $ 157000 - $ 3000 = $ 154,000.

>> Depreciation per annum = Depreciable asset / useful life

>> Depreciation per annum = $ 154,000 / 10 = $ 15,400.

>> Depreciation for 2018 = $ 15,400 * ( 3 / 12 ) = $ 3,850.

>> Depreciation for 2019 = $ 15,400.

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2. Sum of digits method

>> Sum of years = 10 ( 10 +1 ) / 2 = 55.

>> Depreciable asset = $ 157000 - $ 3000 = $ 154,000.

>> Depreciation for 2018 = $ 154,000 * ( 10 / 55 ) * ( 3 / 12 ) = $ 7,000.

>> Depreciation for 2019 = $ 154,000 * ( 9.75 / 55 ) = $ 27,300.

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3 . Double declining balance

>> Depreciation rate = 200 / 10 = 20 %.

>> Depreciation for 2018 = $ 157,000 * 20 % * (3 / 12 ) = $ 7,850.

>> Depreciation for 2019 = ( $ 157,000 - $ 7,850 ) * 20 % = $ 29,830.

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4 . 150 % Double declining balance

>> Depreciation rate = 150 / 10 = 15 %.

>> Depreciation for 2018 = $ 157,000 * 15 % * ( 3 /12 ) = $ 5,888.

>> Depreciation for 2019 = ( $ 157,000 - $ 5,888 ) * 15 % = $ 22,667.

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5. Units of output.

>> Depreciable asset = $ 157000 - $ 3000 = $ 154,000.

>> Depreciation per unit = $ 154,000 / 350,000 = $ 0.44.

>> Depreciation for 2018 = 14,000 * $ 0.44 = $ 6,160.

>> Depreciation for 2019 = 29,000 * $ 0.44 = $ 12,760.

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