On October 1, 2018, the Allegheny Corporation purchased machinery for $157,000.
ID: 2543478 • Letter: O
Question
On October 1, 2018, the Allegheny Corporation purchased machinery for $157,000. The estimated service life of the machinery Is 10 years and the estlmated residual value Is $3,000. The machine Is expected to produce 350,000 unlts durng Its life. Required: Calculate depreclation for 2018 and 2019 using each of the following methods. Partial-year depreclation Is calculated based on the number of months the asset is In service. 1. Straight line. 2 Sum-of-the-years-digits. 3. Double-declining balance. 4. One hundred fifty percent declining balance. 5. Unlts of production (units produced In 2018, 14,000: unlts produced In 2019, 29,000) Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3 Required 4 Required 5 Calculate depreciation for 2018 and 2019 using straight line method. Partial-year depreciation is calculated based on the number of months the asset is in service.Explanation / Answer
Answer 1
Depreciation as per SLM method = (Cost - Residual Value) / Estimated useful life
Answer 2
Depreciation as per sum of the years's digit method = (Cost - Residual Value) * Remaining life / SYD
Where SYD = 10 (10 +1) / 2 = 55
Answer 3
Depreciation as per Double Decline Balance method = SLM rate * 2 * Net book value at the beginning
where SLM rate = 1/ 10 = 10 %
Answer 4
Depreciation as per 150 % Decline Balance method = SLM rate * 2 * Net book value at the beginning
where SLM rate = 1/ 10 = 10 %
Answer 5
Depreciation as per unit of production = Depreciation per unit * units produced in the period
Depreciation per unit = (Cost - Residual Value) / Estimated production = ($157,000 - $3,000) / 350,000 = $0.44 p.u
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