Question

Q1. (25 marks) Rhino Inc. had following property, plant and equipment purchases during 2019: (1) On April 4, equipment costing $250,000 with a 5-year service life and an estimated $40,000 residual value was purchased. (2) On October 4, a machine costing $330,000 with a 5-year service life and an estimated $50,000 residual value was purchased. Assuming Ad Hock has a December 31 year end, prepare the necessary adjusting journal entries at December 31, 2019 to record depreciation under the following depreciation methods (using the nearest whole month method): (a) Straight-line (b) Double-declining-balance

Answer 1

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A B с D E F H J K L M N o P 1 2 3 4 5 Date of purchase Months use till December Cost Life Residual value 4-Apr 9 months 250000 5 years 40000 Date of purchase Months use till December Cost Life Residual value 4-Oct 3 months 330000 5 years 6 50000 7 8 (a) 9 (a) Total depreciation Straight line Depreciation = (Cost - Residual value)/Life of the asset Depreciation 42000 Per annum Depreciation rate on cost 16.80% Per annum Straight line Depreciation = (Cost - Residual value)/Life of the asset Depreciation 56000 Per annum Depreciation rate on cost 16.97% Per annum 10 11 12 Under Straight line method 73500 13 Depreciation for 9 months 31500 Depreciation for 3 months 42000 14 15 (b) 16 (b) Double-declining balance Depreciation =Cost of asset *Straight line depreciation rate * 2 Depreciation 84000 Per annum Double-declining balance Depreciation =Cost of asset *Straight line depreciation rate * 2 Depreciation 112000 Per annum 17 18 Under Double declining balance 147000 19 Depreciation for 9 months 63000 Depreciation for 3 months 84000 20 21 22

For calculation ref:

А B С D E F G H I J K L M months Date of purchase 44108 Months use till December 3 Cost 330000 Life 5 Residual value 50000 years Total depreciation 1 2 Date of purchase 43925 3 Months use till December 9 months 4 Cost 250000 5 Life 5 years 6 Residual value 40000 7 8 (a) Straight line 9 Depreciation = (Cost - Residual value)/Life of the asset 10 Depreciation =(C4-C6)/C5 Per annum 11 Depreciation rate on cost=C10/04 Per annum 12 13 Depreciation for 9 months =C10*9/12 14 15 (b) Double-declining balance 16 Depreciation =Cost of asset *Straight line depreciation rate * 2 17 Depreciation =C4*C11*2 Per annum 18 19 Depreciation for 9 months =C17*9/12 20 21 (a) Straight line Depreciation = (Cost - Residual value)/Life of the asset Depreciation = (14-16)/15 Per annum Depreciation rate on cost=110/14 Per annum Under Straight line method =113+C13 Depreciation for 3 months =110*9/12 (b) Double-declining balance Depreciation =Cost of asset *Straight line depreciation rate * 2 Depreciation =14*111*2 Per annum Under Double declining balance =119+C19 Depreciation for 3 months =117*9/12