Ex. 257 the equipment will have a $1,000 salvage value at the end of its 5-year

Question

Ex. 257 the equipment will have a $1,000 salvage value at the end of its 5-year usefulie k s al estimated that the equipment will produce 100,000 units over its 5-year lie. The equipment used in yr 1 20,000 units, yr 2 25,000 units, yr 3 15,000 units,yr 4 30,000 units and in year5 15,000 units Required: Prepare a schedule showing the cost basis, depreciation rate, depreciation expens and accumulated depreciation for each year under the straight ine, activity method and double declining balance method of depreciation. SL YR DEPRECABLE COST BASE YR ACTMITY

Explanation / Answer

Solution:

Cost of equipment = $61,000

Residual value = $1000

Depreciable cost = $61,000 - $1,000 = $60,000

Annual depreciation - SLM = $60,000 / 5 = $12,000

Depreciation rate - SLM = $12,000 / $60,000 = 20%

Depreciation rate - DDB = 20%*2 = 40%

Depreciation Schedule - SLM Date Asset Cost Depreciable Cost Depreciation Rate Depreciation Expense for the year Accumulated Depreciation Book Value 1-Jan-09 $61,000.00 31-Dec-09 $60,000.00 20% $12,000.00 $12,000.00 $49,000.00 31-Dec-10 $60,000.00 20% $12,000.00 $24,000.00 $37,000.00 31-Dec-11 $60,000.00 20% $12,000.00 $36,000.00 $25,000.00 31-Dec-12 $60,000.00 20% $12,000.00 $48,000.00 $13,000.00 31-Dec-13 $60,000.00 20% $12,000.00 $60,000.00 $1,000.00

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