Question

QUESTION 6

A manufacturing company has purchased three assets:

Item
Lathe

Truck

Building
    
Initial cost
$43,000
$25,000
$900,000
Book life
12 years
200,000 miles
50 years
MACRS class
7 years
5 years
39 years
Salvage value
$3,000
$2,000
$100,000
Book depreciation
DDB
Unit production (UP)
SL
 
The truck was depreciated by the units-of-production method.  Usage of the truck was 22,000 miles, 30,000 and 45,000 miles during the first three years, respectively.
 
Calculate the depreciation stated for each asset for the first three years. For the Lathe use DDB.  For the building consider it was bought on May of Year 1.  

Answer 1

Lathel Item Initial cost Book life Salvage value Book depreciation $43.000 12 years 1 $3.000 DDB Truck $25,000 200,000 miles $2,000 Unit production (UP) Buildid $9,00,000 50 years $1,00,000 SL Depreciation for Lathe: - DDB SLM Rate of Depreciation = 1 n = 112 = 8.33% DDB Rate of Depreciation = 2 x SLM Rate = 16.67% 100.101 Year Opening Balance Depreciation Closing Balance $43,000 $7.168.10 $35,831.90 21 35831.9 $5.973.18 $29,858.72 31 29858.72227 $4.977.45 $24.881.27 $23,000 Depreciation for Truck: - UP Depreciable amount = $ 25000 - $2000 = Life = 200,000 miles Year Usage of truck % of Life 22000 11.00% 30000 15.00% 45000 22.50 Depreciation $2.530.00 $3,450.00 $5,175.00

Depreciation for Building: - Straight Line Date of Purchase May-01 in year 1 No. of Months = 8 months Depreciable amount = $ 900000 - $100000 $8,00,000 Useful Life = 50 years Year Opening Balance Depreciation Closing Balance $9,00,000 $10,666.67 $8,89,333.33 2 $8,89,333.33 $16,000 $8,73,333.33 31 $8,73,333.33 $16,000 $8,57,333.33