Question

P11-11. (Depreciation for Partial Periods—SL, Act., SYD, and DDB) (LO 1, 2) On January 1, 2015, a machine was purchased for $90,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 5 years. The machine can operate for 100,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 20,000 hours; 2016, 25,000 hours; 2017, 15,000 hours; 2018, 30,000 hours; and 2019, 10,000 hours. Instructions (a) Compute the annual depreciation charges over the machine's life assuming a December 31 year-end for each of the following depreciation methods. 1. Straight-line method. 2. Activity method. 3. Sum-of-the-years'-digits method. 4. Double-declining-balance method. (b) Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset's life applying each of the following methods. 1. Straight-line method. 2. Sum-of-the-years'-digits method. 3. Double-declining-balance method.

Answer 1

When the Fiscal Year is Dec 31
Straight Line
Date	Cost of asset	Depreciable cost	Depreciation rate	Depreciation expenses	Accumulated Depreciation	Book value
2015	$90,000	$84,000	20%	$16,800	$16,800	$73,200
2016	$90,000	$84,000	20%	$16,800	$33,600	$56,400
2017	$90,000	$84,000	20%	$16,800	$50,400	$39,600
2018	$90,000	$84,000	20%	$16,800	$67,200	$22,800
2019	$90,000	$84,000	20%	$16,800	$84,000	$6,000
Activity method
Date	Depreciable cost	Depreciation per hours	No. of hours	Depreciation expenses	Accumulated Depreciation	Book value
2015	$84,000	$0.84	20000	$16,800	$16,800	$73,200
2016	$84,000	$0.84	25000	$21,000	$37,800	$52,200
2017	$84,000	$0.84	15000	$12,600	$50,400	$39,600
2018	$84,000	$0.84	30000	$25,200	$75,600	$14,400
2019	$84,000	$0.84	10000	$8,400	$84,000	$6,000
Sum of Year digits method
Date	Cost of asset	Depreciable cost	Remaining Life	Depreciation expenses	Accumulated Depreciation	Book value
2015	$90,000	$84,000	5	$28,000	$28,000	$62,000
2016	$90,000	$84,000	4	$22,400	$50,400	$39,600
2017	$90,000	$84,000	3	$16,800	$67,200	$22,800
2018	$90,000	$84,000	2	$11,200	$78,400	$11,600
2019	$90,000	$84,000	1	$5,600	$84,000	$6,000
Total			15
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
2018	$90,000	$90,000	40.00%	$36,000	$36,000	$54,000
2019	$90,000	$54,000	40.00%	$21,600	$57,600	$32,400
2020	$90,000	$32,400	40.00%	$12,960	$70,560	$19,440
2021	$90,000	$19,440	40.00%	$7,776	$78,336	$11,664
2022	$90,000	$11,664	40.00%	$4,666	$83,002	$6,998
When the Fiscal Year is Sept 30
Straight Line
Date	Cost of asset	Depreciable cost	Depreciation rate	Depreciation expenses	Accumulated Depreciation	Book value
2015-9 months	$90,000	$84,000	20%	$12,600	$12,600	$77,400
2016	$90,000	$84,000	20%	$16,800	$29,400	$60,600
2017	$90,000	$84,000	20%	$16,800	$46,200	$43,800
2018	$90,000	$84,000	20%	$16,800	$63,000	$27,000
2019	$90,000	$84,000	20%	$16,800	$79,800	$10,200
2020-3 months	$90,000	$84,000	20%	$4,200	$84,000	$6,000
Sum of Year digits method
Date	Cost of asset	Depreciable cost	Remaining Life	Depreciation expenses	Accumulated Depreciation	Book value
2015-9 months	$90,000	$84,000	5	$21,000	$21,000	$69,000
2016	$90,000	$84,000	4	$22,400	$43,400	$46,600
2017	$90,000	$84,000	3	$16,800	$60,200	$29,800
2018	$90,000	$84,000	2	$11,200	$71,400	$18,600
2019	$90,000	$84,000	1	$5,600	$77,000	$13,000
2020-3 months	$90,000	$84,000	1	$7,000	$84,000	$6,000
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
2015-9 months	$90,000	$90,000	30.00%	$27,000	$27,000	$63,000
2016	$90,000	$63,000	40.00%	$25,200	$52,200	$37,800
2017	$90,000	$37,800	40.00%	$15,120	$67,320	$22,680
2018	$90,000	$22,680	40.00%	$9,072	$76,392	$13,608
2019	$90,000	$13,608	40.00%	$5,443	$81,835	$8,165
2020-3 months	$90,000	$8,165	10.00%	$816	$82,652	$7,348