Question

A machine with a cost of $71,916.00 has an estimated residual value of $4,607.00 and an estimated life of 3 years or 15,449 hours. It is to be depreciated by the units-of-production method. What is the amount of depreciation for the second full year, during which the machine was used 4,145 hours? Select the correct answer. $18,059.15 $22,436.33 $19,295.22 $44,872.67

Answer 1

Ans. 1	Option   1st       $18,059.15
	Depreciation per unit =   (Cost of asset - Residual value) / Expected activity
	($71,916 - $4,607) / 15,449
	$67,309 / 15,449
	$4.356852	per unit
	Depreciation (2nd year)   = Depreciation per unit * Actual activity of 2nd year
		$4.356852 * 4,145
		$18,059.15
Ans. 2	Option   1st       $26,443.17
	Straight line depreciation = (Cost of asset - Residual value) / Useful life in years
	($168,104 - $9,445) / 6
	$158,659 / 6
	$26,443.17
	*In Straight line method the depreciation is equal in each year.
	So the depreciation for first year is $26,443.17
Ans. 3	Option 4th   $15,168
	Double declining balance method:
	Double declining balance depreciation rate = 2 * 1 / life of assets
		2 * 1 / 5
		0.40
	*Depreciation = Remaining value at the beginning of the year * Double declining balance depreciation rate
	Year	Value at the beginning (a)	Depreciation (b = a*0.40)	Net book value (a - b)
	1	$63,200	$25,280	$37,920
	2	$37,920	$15,168	$22,752