Question

View Policies Current Attempt in Progress The details of the January 1, 2020 purchase of property, plant & equipment by Blue Industries is as follows: Cost Residual Useful Life Depreciation Value Method Machinery $1,236,000 $96,000 1 million units Activity Method Building $903,000 $93,000 30 years Straight line Computer $172,500 $12,000 5 years Double-Declining-Balance During 2020 Blue produced 196,000 units using its machinery. Calculate the 2020 depreciation for each of the property, plant & equipment items. (Round depreciation per unit to 2 decimal places, e.g. 7.25 and final answers to 0 decimal places, e.g. 5,125.) 2020 Depreciation Expense Machinery Equipment $ Building $ $ Computer Equipment

Answer 1

Solution

Machine Equipment	$             223,440
Building	$               27,000
Computer Equipment	$               69,000

Working

Units of Production method-Machine Equipment
A	Cost	$ 1,236,000
B	Residual Value	$ 96,000
C=A - B	Depreciable base	$ 1,140,000
D	Usage in units(in tonns)	1,000,000
E	Depreciation per tonn	$ 1.14

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Depreciation schedule-Units of Activity
Year	Book Value	Usage	Depreciation expense	Accumulated Depreciation	Ending Book Value
2020	$          1,236,000	196000	$                 223,440	$                  223,440	$         1,012,560

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Straight line Method -Building
A	Cost	$ 903,000
B	Residual Value	$ 93,000
C=A - B	Depreciable base	$ 810,000
D	Life [in years left ]	30
E=C/D	Annual SLM depreciation	$ 27,000

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Double declining Method-Computer
A	Cost	$ 172,500
B	Residual Value	$ 12,000
C=A - B	Depreciable base	$ 160,500
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$ 32,100
F=E/C	SLM Rate	20.00%
G=F x 2	DDB Rate	40.00%

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Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
2020	$ 172,500	40.00%	$ 69,000	$ 69,000	$ 103,500