Question

Machinery is purchased on July 1 of the current fiscal year for $240,000. It is expected to have a useful life of four years, or 25,000 operating hours, and a residual value of $15,000. Compute the depreciation for the last six months of the current fiscal year ending December 31 by each of the following methods: a. Straight-line b. Double-declining-balance c. Units-of-activity (used for 1,600 hours during the current year)

Answer 1

Answers

Straight line= $28,150

DDB= $60,000

Units of activity = $14,400

Straight line Method
A	Cost	$ 2,40,000.00
B	Residual Value	$     15,000.00
C=A - B	Depreciable base	$ 2,25,000.00
D	Life [in years left ]	4
E=C/D	Annual SLM depreciation	$     56,250.00

Year	Book Value	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$ 2,40,000.00	$     28,125.00	$ 2,11,875.00	$ 28,125.00

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Double declining Method
A	Cost	$ 2,40,000.00
B	Residual Value	$     15,000.00
C=A - B	Depreciable base	$ 2,25,000.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$     56,250.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$       2,40,000	50.00%	$           60,000	$   1,80,000	$ 60,000

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Units of Production method
A	Cost	$ 2,40,000.00
B	Residual Value	$     15,000.00
C=A - B	Depreciable base	$ 2,25,000.00
D	Usage in units(in Miles)	25000
E	Depreciation per Mile	$                9.00

Year	Book Value	Usage	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$ 2,40,000.00	1600	$     14,400.00	$ 2,25,600.00	$ 14,400.00