On January 1, 2018 Friendly Farm Company purchased a new machine at a cost of $350,000. The machine has an estimated useful life of 4 years or 100,000 hours and residual value of $30,000. The machine will be used 30,000 hours in year 1, 40,000 hours in year 2, 20,000 hours in year 3 and 10,000 hours in year 4.
Requirements:
Prepare a depreciation schedule using each of the three methods: Straight line, Units of Production and Double Declining Balance.
You may use the template
I
have attached here or you may create your own depreciation
schedules using your textbook as a guideline.
Do all mathematical computations in Excel when you can. Don’t use a calculator and “type” the number in. That’s not letting the spreadsheet do the work.
.
Homework Answers
| Straight Line Method | |||
| Cost | $ 350,000.00 | ||
| Residual Value | $ 30,000.00 | ||
| Depreciable Cost | $ 320,000.00 | ||
| Est. useful life | 4 | years | |
| Depreciation expense | $ 80,000.00 | per year | |
| Beginning | Accumulated | Ending | |||
| Year | Cost | WDV | Depreciation | Depreciation | WDV |
| 1 | $ 350,000.00 | $ 350,000.00 | $ 80,000.00 | $ 80,000.00 | $ 270,000.00 |
| 2 | $ 350,000.00 | $ 270,000.00 | $ 80,000.00 | $ 160,000.00 | $ 190,000.00 |
| 3 | $ 350,000.00 | $ 190,000.00 | $ 80,000.00 | $ 240,000.00 | $ 110,000.00 |
| 4 | $ 350,000.00 | $ 110,000.00 | $ 80,000.00 | $ 320,000.00 | $ 30,000.00 |
| Units of Production Method | |||
| Cost | $ 350,000.00 | ||
| Residual Value | $ 30,000.00 | ||
| Depreciable Cost | $ 320,000.00 | ||
| Total hours | 100000 | ||
| Depreciation Expense | $ 3.20 | per hour | |
| Beginning | Hours | Accumulated | Ending | ||||
| Year | Cost | WDV | Worked | Rate | Depreciation | Depreciation | WDV |
| 1 | $ 350,000.00 | $ 350,000.00 | 30000 | $ 3.20 | $ 96,000.00 | $ 96,000.00 | $ 254,000.00 |
| 2 | $ 350,000.00 | $ 254,000.00 | 40000 | $ 3.20 | $ 128,000.00 | $ 224,000.00 | $ 126,000.00 |
| 3 | $ 350,000.00 | $ 126,000.00 | 20000 | $ 3.20 | $ 64,000.00 | $ 288,000.00 | $ 62,000.00 |
| 4 | $ 350,000.00 | $ 62,000.00 | 10000 | $ 3.20 | $ 32,000.00 | $ 320,000.00 | $ 30,000.00 |
| Double Declining Balance Method | |||
| Est. useful life | 4 | years | |
| Rate | (100% / 4 years) x 2 | ||
| = | 50% | ||
| Beginning | Accumulated | Ending | ||||
| Year | Cost | WDV | Rate | Depreciation | Depreciation | WDV |
| 1 | $ 350,000.00 | $ 350,000.00 | 50% | $ 175,000.00 | $ 175,000.00 | $ 175,000.00 |
| 2 | $ 350,000.00 | $ 175,000.00 | 50% | $ 87,500.00 | $ 262,500.00 | $ 87,500.00 |
| 3 | $ 350,000.00 | $ 87,500.00 | 50% | $ 43,750.00 | $ 306,250.00 | $ 43,750.00 |
| 4 | $ 350,000.00 | $ 43,750.00 | 50% | $ 13,750.00 | $ 320,000.00 | $ 30,000.00 |
| Depreciation for last year = | Beginning WDV for year 4 - Ending residual value | |||||
| = | $ 43750 - $ 30000 | |||||
| = | $ 13,750.00 | |||||
Add Answer to:
On January 1, 2018 Friendly Farm Company purchased a new machine
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