PART 2 Depreciation Methods 15 marks Matador Co purchased a

PART 2: Depreciation Methods (15 marks) Matador Co. purchased a machine on January 1,2011, for S1,409,000. Using the table below, calculate the annual depreciation for machine\'s life it was used 4,000; 8,000; 16,000, 10,000; and 2,000 hours Year ba Units-of-production 2011 2012 2013 2014 15

Solution

Depreciation Methods 1 Straight Line method Depreciation per year = (Cost of Machine-Salvage value)/useful life                                               = ($1,409,000-$150000)/5                                               = $251800 2 Double Declining balance Depreciation = 2 x Straight line rate x book value at the beginning of the year Year Book value, beginning of the year Double declining depreciation Book value, end of year 2011 $1,409,000 $563,600 $845,400 2012 $845,400 $338,160 $507,240 2013 $507,240 $202,896 $304,344 2014 $304,344 $121,738 $182,606 2015 $182,606 $32,606 $150,000 3 Units of production depreciation method Depreciation rate = (Cost-Salvage value)/ estimated life in hours Depreciation rate = ($1,409,000-$150,000)/ 40000 hours                                       = $31.475 per hour Year Machine use in hours Rate Depreciation 2011 4000 $31.48 $125,900 2012 8000 $31.48 $251,800 2013 16000 $31.48 $503,600 2014 10000 $31.48 $314,750 2015 2000 $31.48 $62,950 Depreciation Method Year Straight-line Double declining balance Units of Production 2011 $251,800 $563,600 $125,900 2012 $251,800 $338,160 $251,800 2013 $251,800 $202,896 $503,600 2014 $251,800 $121,738 $314,750 2015 $251,800 $32,606 $62,950