Question

An equipment has been purchased for a project to be completed in 6 years. The initial cost of equipment (6)
was Rs. 7,500,000. It is estimated that the used equipment can be sold in auction at a price of Rs. 1,200,000
after completion of the project. The expected/planned yearly usage of the equipment is as follows:
Year Equipment Usage (Hours)
1 140
2 170
3 230
4 80
5 110
6 70

Develop the yearly depreciation schedule of the equipment according to:
a) Sum-of-Years-Digit Method
b) Units-of-production Method
c) Double Declining Balance Method

Answer 1

	Sum of years digit method	Calculation	Units of production methods	Calculation	Double declining balance method	Calculation
Cost	7500000	=depreciation base*fraction of year	7500000	=deprecition base*(hours worked during current year/total hours estimated)	75,00,000.00	=WDV*double dimishing rate
Depreciation for year 1	1800000	=6300000*6/21	1102500	=6300000*(140/800)	24,99,750.00	=7500000*0.3334
Balance end of year	5700000		6397500		50,00,250.00
Depreciation for year 2	1500000	=6300000*5/21	1338750	=6300000*(170/800)	16,66,583.33	=5000250*0.3334
Balance end of year	4200000		5058750		33,33,666.68
Depreciation for year 3	1200000	=6300000*4/21	1811250	=6300000*(230/800)	11,11,111.10	=3333666.68*0.3334
Balance end of year	3000000		3247500		22,22,555.57
Depreciation for year 4	900000	=6300000*3/21	630000	=6300000*(80/800)	7,40,777.77	=2222555.57*0.3334
Balance end of year	2100000		2617500		14,81,777.80
Depreciation for year 5	600000	=6300000*2/21	866250	=6300000*(110/800)	4,93,876.54	=740777.77*0.3334
Balance end of year	1500000		1751250		9,87,901.26
Depreciation for year 6	300000	=6300000*1/21	551250	=6300000*(70/800)	3,29,267.49	=987901.26*0.3334
Balance end of year	1200000		1200000		6,58,633.77

Original cost	7500000
Salvage value	1200000
Usefullife	6 years
Straight line depreciation rate	=100/6
	16.66666667
Double dimishing rate	=2*stratighline rate
	=2*16.67
	33.34
Sum of years digit method
Depreication base	=original cost - salvage value
	=7500000-1200000
	6300000
Sum of years	=1+2+3+4+5+6
	21
Year 1 fraction rate	=6/21
Yeas 2	=5/21
Year 3	=4/21
Year 4	=3/21
Year 5	=2/21
Year 6	=1/21
Units of production
Total estimated hours of production	=140+170+230+80+110+70
	800