Exercise 112 Depreciation methods L0112 years and the estima

Exercise 11-2 Depreciation methods [L011-2] years and the estimated residual value is $7.000. The machine is expected to produce 200,000 units during its life. Calculate depreciation for 2018 and 2019 using each of the following methods. 0.58 1. Straight line. 4. One 5. Units of production (units produced in 2018, 31,000, units produced in 2019, 26,000) Ch 2018 2019

Solution

Cost of the Asset = $128000 Residual Value - $7000 Useful life = 10 years No of units to be produced = 200000 units 1 Straight Line Annual depreciation Expense = (Cost of the Plant & Machinery - Salvage Value)/Useful Life = ($128000-$7000)/ 10 years $ 12,100.00 depreciation Expense 2018 $    12,100.00 2019 $    12,100.00 2 Sum of years digit Depreciation Expense for year 2018 = (Cost of the Plant & Machinery - Salvage Value)*10/sum of 1 to 10 = ($128000-$7000)*10/55 $ 22,000.00 Depreciation Expense for year 2019 = (Cost of the Plant & Machinery - Salvage Value)*9/sum of 1 to 10 = ($128000-$7000)*9/55 $ 19,800.00 3 Double Declining Method Straight-Line Depreciation Percent = 100% / Useful Life = 100%/10years = 10% Double declining Depreciation Rate = 2 x Straight-Line Depreciation Percent = 2*10% = 20% 2018 = Cost of asset* Double declining dep rate = $128000*20% $    25,600.00 2019 = Book Value of asset* Double declining dep rate = ($128000-25600)*20% $    20,480.00 Annual period Beginning Book Value Depreciation Rate (%) depreciation Expense Accumulated dep Book Value 2018 $ 128,000.00 20% 25600 25600 $ 102,400.00 2019 $ 102,400.00 20% 20480 46080 $    56,320.00 4 150% Declining Method Straight-Line Depreciation Percent = 100% / Useful Life = 100%/10years = 10% Double declining Depreciation Rate = 1.5 x Straight-Line Depreciation Percent = 1.5*10% = 15% 2018 = Cost of asset* Double declining dep rate = $128000*15% $    19,200.00 2019 = Book Value of asset* Double declining dep rate = ($128000-19200)*15% $    16,320.00 Annual period Beginning Book Value Depreciation Rate (%) depreciation Expense Accumulated dep Book Value 2018 $ 128,000.00 15% 19200 19200 $ 108,800.00 2019 $ 108,800.00 15% 16320 35520 $    73,280.00 5 Unit of Production Method Depreciation per units = Cost of Asset-Salvage Value/No. of units produced Depreciation per units = ($128000-$7000)/200000 units $          0.605 per unit No of units produces dep per unit Depreciation 2018 31000 units $          0.605 $ 18,755.000 2019 26000 units $          0.605 $    15,730.00