Question

Revise your worksheet to reflect these updated assumptions and then answer the questions that follow.

Original Cost	$	100,800
Estimated Residual Value	$	25,200
Estimated Useful Years		6
Estimated Units		14,000

Actual Units:
Year 1	1,400
Year 2	2,520
Year 3	3,080
Year 4	3,360
Year 5	2,800
Year 6	2,240
	15,400

Required:
1. Use your spreadsheet to recalculate Depreciation Expense, Accumulated Depreciation, and the Book Value for Year 6 under each method. Note your revised values below.

2. Prepare the journal entry to record depreciation in Year 6 for each of the methods

Answer 1

Ans 1 Year - 6 Depreciation Exp Accumulated Depreciation $82,800 Book Value $25,200 $13,800 Note (0) Note (ii) Straight Line Unit production depreciation Double Declining Dep $5,024 $82,800 $25,200 $0 $82,800 $25,200 Note (iii) Cost Salvage Value Useful Life (in years) $1,08,000 $25,200 Year Accumulated Depreciation Book Value Note (i) Straight Line Depreciation Schedule Straight line depreciation = (Initial Cost-Salvage Value) / Estimated useful life Depreciation for the year Depreciation Actual Cost Depreciable Cost Useful Life Expense 0 $1,08,000 $82,800 / $13,800 $69,000 / $13,800 $55,200 7 $13,800 $41,400 / $13,800 $27,600 / $13,800 $13,800 / $13,800 ou WNO нуш в сло $13,800 $27,600 $41,400 $55,200 $69,000 $82,800 $94,200 $80,400 $ 66,600 $52,800 $39,000 $25,200

Note (ii) Unit of Production depreciation Estimated operate 14000 Units (Initial Cost-Salvage Value) / Estimated units production - Depreciation per unit [($108000-$25200)/14000] = $ 5.91 per unit Depreciation for the year Depreciable Per Actual Cost Number of Depreciation Accumulated Year Book Value Unit units Expense Depreciation (A) (B) (C) (A)-(C) $1,08,000 $5.91 x 1400 = $8,274 $8,274 $99,726 $5.91 x 2520 = $14,893 $23,167 $84,833 $5.91 x 3080 $18,203 $41,370 $66,630 $5.91 x 3360 = $19,858 $61,228 $46,772 $5.91 x 2800 = $16,548 $77,776 $30,224 $5,024 $82,800 $25,200 In the year 6, depreciation is provided of $5024 to restrict the closing book value to the salvage value of the asset Note (iii) Double Declining Balance Method (DDBM) = 2/Useful Life* Book Value Depreciation for the year Accumulated Depreciation Date Actual Cost DDB rate Book Value Book Value Expense Depreciation $1,08,000 $1,08,000 x 0.333333 = $36,000 $36,000 $72,000 $72,000 x 0.333333 = $24,000 $60,000 $48,000 $48,000 x 0.333333 = $16,000 $76,000 $32,000 $6,800 $82,800 $25,200 $82,800 $25,200 $0 $82,800 $25,200 In the year 6, depreciation is provided of $6800 to restrict the closing book value to the salvage value of the asset and in later years, no depreciation expense will be provided. $0

Ans 2 Journal Entry for Year 6 Account Title Depreciation Expense Accumulated Depreciation Straight Line Debit $13,800 Credit Unit of production depreciation Debit Credit $5,024 $5,024 Double Declining Dep Debit Credit $0 $0 $13,800