Problem 11-11 On January 1, 201 s, a m ochne was purchased for S99 000. The mach
ID: 2510497 • Letter: P
Question
Problem 11-11 On January 1, 201 s, a m ochne was purchased for S99 000. The machine has an estimated sal age vak" of SS 600 and m-'mated osel. Me 015 yea. The machine can opere fe·110,000 hours before it reed' to be replaced. The company dosed its tooks on December 33 and operates the machine as follows: 2015, 22,000 hrs 2016, 27,500 hrs; 2017, 16,500 hrs; 2018, 33,000 hrs; and 2019, 11,000 hrs Compute the anrual deprecistion charges over the machine's Iife assuming a December 31 year end for each of the following deprecistion methods (Phoand answers to 0 decimal places, e.g..45,892) (1) Straight Ine Method () Activity Methed 015 2016 2017 2018 019 (3) Sum-of-the-Years-Digits Method 2016 2017 2018 (4) Double Decleing- fialance MethodExplanation / Answer
1. Depreciation Using Straight Line Method
Annual Depreciation = ( Cost of the asset – Salvage Value ) / Usefull Life
= ( $99000 - $6600 ) / 5 Years
= $18,480/ Year
Depreciation Year 2015 = $18,480
Depreciation Year 2016 = $18,480
Depreciation Year 2017 = $18,480
Depreciation Year 2018 = $18,480
Depreciation Year 2019 = $18,480
2. 2. Depreciation Under Units Of Production Method
Depreciation = [(Cost of Asset - Residual Value) / Estimated Total Production] x Actual Production
Depreciation Year 2015 = $99000 x (22000 Units / 110000 Units)
= $19,800
Depreciation Year 2016 = $99000 x (27500 Units / 110000 Units)
= $24,750
Depreciation Year 2017 = $99000 x (16500 Units / 110000 Units)
= $14,850
Depreciation Year 2018 = $99000 x (33000 Units / 110000 Units)
= $29,700
Depreciation Year 2019 = $99000 x (11000 Units / 110000 Units)
= $9,900
Depreciation Year 2015 = $19800
Depreciation Year 2016 = $24750
Depreciation Year 2017 = $14850
Depreciation Year 2018 = $29700
Depreciation Year 2019 = $9900
3. 2.Depreciation Under Sum of years digit method
Depreciation Year 2015= $ 92400 x 5/15 = $30800
Depreciation Year 2016= $ 92400 x 4/15 = $24640
Depreciation Year 2017= $ 92400 x 3/15 = $18480
Depreciation Year 2018= $ 92400 x 2/15 = $12320
Depreciation Year 2019= $ 92400 x 1/15 = $6160
4.Depreciation Under Double Declining Balance Method
Year
Book Value Begining
Depreciation = 2 x SL Depreciation Rate x Book Value Begining
Book Value
2015
99000
39600
59400
2016
59400
23760
35640
2017
35640
14256
21384
2018
21384
8554
12830
2019
12830
6230(B/f)
6600
***Stright Line Depreciation Rate = 1/5 = 20%
Year
Book Value Begining
Depreciation = 2 x SL Depreciation Rate x Book Value Begining
Book Value
2015
99000
39600
59400
2016
59400
23760
35640
2017
35640
14256
21384
2018
21384
8554
12830
2019
12830
6230(B/f)
6600