On October 1, 2018, the Allegheny Corporation purchased machinery for $267,000.

Question

On October 1, 2018, the Allegheny Corporation purchased machinery for $267,000. The estimated service life of the machinery is 10 years and the estimated residual value is $3,000. The machine is expected to produce 480,000 units during its life.

Required:
Calculate depreciation for 2018 and 2019 using each of the following methods. Partial-year depreciation 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. Units of production (units produced in 2018, 24,000; units produced in 2019, 39,000).

Explanation / Answer

1.

2.

3.

4.

5.

Straight line Method Cost of Equipment $ 267,000 Less: Salvage value $      3,000 Depreciable value $ 264,000 Depreciation per year ($264,000 / 10) $    26,400 Depreciation for 2018 ($26,400 / 12 * 3 months) $      6,600 Depreciation for 2019 $    26,400

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