On January 1, 2018, the Allegheny Corporation purchased machinery for $148,000.
ID: 2523301 • Letter: O
Question
On January 1, 2018, the Allegheny Corporation purchased machinery for $148,000. The estimated service life of the machinery is 10 years and the estimated residual value is $16,000. The machine is expected to produce 400,000 units during its life.
Required:
Calculate depreciation for 2018 and 2019 using each of the following methods.
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, 48,000; units produced in 2019, 43,000).
Explanation / Answer
Answers
A
Cost
$ 1,48,000.00
B
Residual Value
$ 16,000.00
C=A - B
Depreciable base
$ 1,32,000.00
D
Life [in years]
10
E=C/D
Annual SLM depreciation
$ 13,200.00
Year
Book Value
Depreciation expense
Ending Book Value
Accumulated Depreciation
2018
$ 1,48,000.00
$ 13,200.00
$ 1,34,800.00
$ 13,200.00
2019
$ 1,34,800.00
$ 13,200.00
$ 1,21,600.00
$ 26,400.00
A
Cost
$ 1,48,000.00
B
Residual Value
$ 16,000.00
C=A - B
Depreciable base
$ 1,32,000.00
Sum of digits
55
Year
Depreciable base
Formula
Depreciation expense
Accumulated Depreciation
Ending Book Value
2018
$ 1,32,000.00
[132000 x 10/55]
$ 24,000.00
$ 24,000.00
$ 1,24,000.00
2019
$ 1,32,000.00
[132000 x 9/55]
$ 21,600.00
$ 45,600.00
$ 1,02,400.00
A
Cost
$ 1,48,000.00
B
Residual Value
$ 16,000.00
C=A - B
Depreciable base
$ 1,32,000.00
D
Life [in years]
10
E=C/D
Annual SLM depreciation
$ 13,200.00
F=E/C
SLM Rate
10.00%
G=F x 2
DDB Rate
20.00%
Year
Beginning Book Value
Depreciation rate
Depreciation expense
Ending Book Value
Accumulated Depreciation
2018
$ 1,48,000.00
20.00%
29600
$ 1,18,400.00
29600
2019
$ 1,18,400.00
20.00%
23680
$ 94,720.00
53280
A
Cost
$ 1,48,000.00
B
Residual Value
$ 16,000.00
C=A - B
Depreciable base
$ 1,32,000.00
D
Life [in years]
10
E=C/D
Annual SLM depreciation
$ 13,200.00
F=E/C
SLM Rate
10.00%
G=F x 1.5
DDB Rate
15.00%
Year
Beginning Book Value
Depreciation rate
Depreciation expense
Ending Book Value
Accumulated Depreciation
2018
$ 1,48,000.00
15.00%
22200
$ 1,25,800.00
22200
2019
$ 1,25,800.00
15.00%
18870
$ 1,06,930.00
41070
A
Cost
$ 1,48,000.00
B
Residual Value
$ 16,000.00
C=A - B
Depreciable base
$ 1,32,000.00
D
Units
400000
E
Depreciation per units
$0.33
Year
Book Value
Units
Depreciation expense [Units x $0.33]
Ending Book Value
Accumulated Depreciation
2018
$ 1,48,000.00
48000
$ 15,840.00
$ 1,32,160.00
$ 15,840.00
2019
$ 1,32,160.00
43000
$ 14,190.00
$ 1,17,970.00
$ 30,030.00
A
Cost
$ 1,48,000.00
B
Residual Value
$ 16,000.00
C=A - B
Depreciable base
$ 1,32,000.00
D
Life [in years]
10
E=C/D
Annual SLM depreciation
$ 13,200.00
Year
Book Value
Depreciation expense
Ending Book Value
Accumulated Depreciation
2018
$ 1,48,000.00
$ 13,200.00
$ 1,34,800.00
$ 13,200.00
2019
$ 1,34,800.00
$ 13,200.00
$ 1,21,600.00
$ 26,400.00