The recorded costs of this machine was 180,000. Evers estimates that the useful
ID: 2447361 • Letter: T
Question
The recorded costs of this machine was 180,000. Evers estimates that the useful life of the machine is 4 years with a $9,900.
1) Evers uses straight-line method of depreciation.
2) Evers uses declining balance method. The rate used is twice the straight line rate.
3)Evers uses the units of activity method and estimates that the useful life of the machine is 129,750 units. Actual usage follows : 2017, 49,000 units; 2018, 37,000 units; 2019, 25,000 units; 2020, 18,750 units.
Depreciation Expense
2017 2018 2019 2020
Straight line method
Declining balance method
Units of activity balance
Please help me with each method for all 4 years.
Explanation / Answer
Depreciation Expense - using Straight line Method
Cost oof machine = 180000
Residual value = 9900
useful life = 4 years
Depreciation expense for 2017 Assuming the machine was purchased in the begining of the accounting year
= 180000/9900 = $170100
=170100/4 = $42525
for 2018 = $42525 and for 2019 = $42525 and for 2020 = $42525
Declining Balance Method
Declining balance depreciation is calculated using the following formula:
Depreciation = Depreciaiton rate x Book value of Asset
Decpeciaiton rate = Accelarator x straight line rate
Depreciation = 2 x 25%(170100x25% = 42525)
Depeciaiton = 50%
Depreciaiton in 2017 = 180000x 50% =$90000
Depreciation in 2018
Book value = cost - Accumulated Depreciaition
Book value = 180000-90000 =$ 90000
Depreciaition in 2018 = 90000x 50% =45000
Depreciaiton in 2019
Book value = cost - Accumulated Depreciaition
Book value = 90000-45000 =$45000
Depreciation in 2019 = 45000x50% = $22500
Depreciation in 2020
Book value = cost - Accumulated Depreciaition
Book value = 45000 - 22500 = $22500
Depreciation = 22500 x50% = $11250
Units of Activity Method
Annual Depreciaiton Expenses =(cost of Fixed assets- Residual value)/Estimated Total Production xActual Production
Annual Depreciation Expense = (180000 - 9900)/129750 x 49000
Annual Depreciation Expense in 2017 = 170100 /129750 =1.32x49000 = $64680
Annual Depreciation Expense in 2018 = 170100/129750 =1.32x37000 = $48840
Annual Depreciation Expense in 2019 = 170100 129750 = 1.32 x 25000 = $33000
Annual Depreciation Expense in 2020 = 170100 129750 = 1.32 x18750 = $24750
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