Question

On January 1, 2021, the Allegheny Corporation purchased equipment for $199,000. The estimated service life of the equipment is 10 years and the estimated residual value is $12,000. The equipment is expected to produce 248,000 units during its life.

Required:
Calculate depreciation for 2021 and 2022 using each of the following methods.

3. Assume instead the equipment was purchased on October 1, 2021. Calculate depreciation for 2021 and 2022 using each of the two methods. Partial-year depreciation is calculated based on the number of months the asset is in service. (Do not round intermediate answers and round your answers to the nearest whole dollar amount.)

Answer 1

Sum of the year Year Cost of the assets Salvage value 2021 S 199,000 S 12.000 2022 $ 199,000 S 12.000 Depreciable value sum of the year 187,000|1+2+3+4+5+6+7+8+9+10 = 55 187,000|1+2+3+4+5+6+7+8+9+10 = 55 Depreciation $187.000*10/55 = $34,000 $187.000*9/55 = $30.600 One hundred fifty percent declining balance Year - a Double declained depreciation - c= b/Life of assets *150% Net book value, End of the year - d=b-c Net Book value, beginning of year - b 2021 $ 199.000 2022 $ 169,150 $ 29.850 25,373 169,150 143.778 S 2. Equipment purchased on October 2021 Year Cost of the assets Salvage value 2021 S 199,000 12.000 2022 S 199,000 $ 12.000 Depreciable value sum of the year 187,000|1+2+3+4+5+6+7+8+9+10 = 55 187.000 1+2+3+4+5+6+7+8+9+10 = 55 2021 Depreciation |2022 Depreciation $187.000*(10/55) * (3/12) = $8,500 $187.000*(10/55) * (9/12) = $25,500 S187.000*(9/55) * (3/12) = $7,650 8500 33150 Total depreciation Depreciation under DDB Method Year - a Net Book value, Double declained depreciation - c= Net book value, End beginning of year - b b/Life of assets*150% of the year -d=b-c 2021 S 199,000 $199,000/10*150%*3/12 = $7,463 191,537 2022 $ 191,53715 28.731 S 162,806