On October 1, 2016, the Allegheny Corporation purchased machinery for $115,000.

Question

On October 1, 2016, the Allegheny Corporation purchased machinery for $115,000. The estimated service life of the machinery is 10 years and the estimated residual value is $5,000. The machine is expected to produce 220,000 units during its life.

Calculate depreciation for 2016 and 2017 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. (Do not round intermediate calculations.)

1. Straigh Line

2. Sum-of-the- year's digits

3. Double-declining balance

4. One hundred fifty percent declining balance

5. Units of production (units produced in 2016, 10,000; units produced in 2017, 25,000). (Round "Depreciation per unit rate" answers to 2 decimal places.)

     

Required:

Explanation / Answer

1.

Depreciation Schedule

Cost: $115,000.00, Salvage: $5,000.00, Life: 10 years
Convention: Full-Month, First Year: 3 months

2.

Depreciation Schedule

Cost: $115,000.00, Salvage: $5,000.00
Life: 10 years, First Year: 3 months

3.

Depreciation Schedule

Cost: $115,000.00, Salvage: $5,000.00, Life: 10 years, Factor: 2
Convention: Full-Month, First Year: 3 months

4.Depriciation 2016

5.2016

115000-5000/220,000=0.5*10,000=$5,000

2017 depriciation=0.5*25,000=$12,500.

Depreciation Schedule Year
Book Value
Year Start Depreciation
Expense Accumulated
Depreciation Book Value
Year End 2016 $115,000 $2,750.00 $2,750 $112,250 2017 $112,250 $11,000.00 $13,750 $101,250

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