Zerbs Industries purchased a machine for $I92,000 on Jan-1,1994. Zerbe expects t

Question

Zerbs Industries purchased a machine for $I92,000 on Jan-1,1994. Zerbe expects to use the machine for 6 years, at which time salvage value will be $21,900. Production from the machine is budgeted a- a total of 150,000 units, allocated to each year as follows: 1994, 25000 imi , 1995, 30,000 units; 1996, 35000 units;, 1997, 30,000, 1998, 20,000 units; 1999, 10.000 units. Calculate the amount of depreciation in each of the 6 years using each of the following methods:. The straight line method The Units - of - output method The Sum-of-the years digits The double declining Balance

Explanation / Answer

Calculation of Depreciation 1 Straight Line Method Depreciation = Cost- Salvage Value/ No of years 192000-21900/6 $ 28350 per year in each of 6 year 2 Units of output method Depreciation per unit = Cost-Salvage/ No of units = 192000-21900/150000 = $ 1.134 per unit Year Units Per Unit Depreciation 1 25000 1.134 28350 2 30000 1.134 34020 3 35000 1.134 39690 4 30000 1.134 34020 5 20000 1.134 22680 6 10000 1.134 11340 Sum of years digit method Cost - Salvage/ Sum of years digits 192000-21900/6+5+4+3+2+1 170100/21 8100 Year Depreciation 1 8100 6 48600 2 8100 5 40500 3 8100 4 32400 4 8100 3 24300 5 8100 2 16200 6 8100 1 8100

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