Homework SourseOn January 2 2018 Jatson Corporation acquired a new machine
On January 2, 2018, Jatson Corporation acquired a new machine with an estimated useful life of five years. The cost of the equipment was $60,000 with an estimated residual value of $5,000.
a-1. Prepare a complete depreciation table under the straight-line method. Assume that a full year of depreciation was taken in 2018.
a-2. Prepare a complete depreciation table under the 200 percent declining-balance method. Assume that a full year of depreciation was taken in 2018.
a-3. Prepare a complete depreciation table under the 150 percent declining-balance with a switch to straight-line when it will maximize depreciation expense. Assume that a full year of depreciation was taken in 2018.
Solution
a-1) Annual depreciation exp = (Cost - Salvage Value)/Useful Life
= ($60,000 - $5,000)/5 yrs
= $55,000/5 yrs = $11,000 per year
Depreciation Table (Amounts in $)
a-2) Depreciation rate under 200 declining balance method = (1/Useful life)*200%
= (1/5 yrs)*200% = 0.40 or 40%
Depreciation Table (Amounts in $)
a-3) Depreciation rate under 150 declining balance method = (1/Useful life)*150%
= (1/5 yrs)*150% = 0.30 or 30%
Depreciation Table (Amounts in $)
**Switch to straight line in 2021 = (Book Value at the beg of 2021 - Salvage Value)/Remaining useful life
= ($20,580 - $5,000)/2 yrs = $7,790 per year
| Year | Beginning Balance (A) | Depreciation Exp (B) | Accumulated Depreciation | Ending Balance (A-B) |
| 2018 | 60,000 | 11,000 | 11,000 | 49,000 |
| 2019 | 49,000 | 11,000 | 22,000 | 38,000 |
| 2020 | 38,000 | 11,000 | 33,000 | 27,000 |
| 2021 | 27,000 | 11,000 | 44,000 | 16,000 |
| 2022 | 16,000 | 11,000 | 55,000 | 5,000 |
