Kirk Ltd. manufactures sporting goods. The following information applies to a ma

Question

Kirk Ltd. manufactures sporting goods. The following information applies to a machine purchased on
January 1, 2017.

2017 2018 2019 2020 2021
Purchae Price $ 80,000
Delivery Cost $ 3,000
Installation Charge $ 2,000
Estimted life 5 Years
Estimated Units 160,000 25,000 45,000 35,000 30,000 25,000 Units/Yr
Salvage Estimate $ 5,000

REQUIRED
Determine the amount of depreciation for 2017 and 2018 using each of the following methods
A) - Straight - Line
B) - Double-Declining Balance
C) - Units of Production

Explanation / Answer

Determine the amount of depreciation for 2017 and 2018 using each of the following methods
A) - Straight - Line

Depreciation expense = (85000-5000)/5 = 16000

2017 dep = 16000

2018 dep = 16000

b) Double decline rate :

Straight line rate = 100/5 = 20%

Double decline rate = 20%*2 = 40%

2017 dep = 85000*40% = 34000

2018 dep = 85000*60%*40% = 20400

c) Unit of production

Dep rate = (85000-5000)/160000 = 0.50 per unit

2017 dep = 25000*.50 = 12500

2018 dep = 45000*.50 = 22500

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