Question

On May 31, 2014, Franklin Company purchased a machine for $205,000. The machine has useful life 5 years or 100,000 units with $5,000 salvage value. Franklin uses 14,000 units in 2014 and 38,000 units in 2015. Compute depreciation expense for 2014 and 2015 and prepare the necessary JOURNAL ENTRIES at year end December 31 using the following methods:

1.   Straight-line

2.   Units of activity

3.   Double-Declining Balance

Answer 1

Straight Line method
Year	Cost of asset	Depreciable cost	Depreciation rate	Depreciation expenses	Accumulated Depreciation	Book value
At Acquistion	$205,000					$205,000
2014-7 months		$200,000	20.00%	$23,333	$23,333	$181,667
2015		$200,000	20.00%	$40,000	$63,333	$141,667
Units of Activity
Date	Depreciable cost	Depreciation per unit	No. of units	Depreciation expenses	Accumulated Depreciation	Book value
At Acquistion						$205,000
2014-7 months	$200,000	$2.00	14000	$28,000	$28,000	$177,000
2015	$200,000	$2.00	38000	$76,000	$104,000	$101,000
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
At Acquistion	$205,000					$205,000
2014-7 months		$205,000	40.00%	$47,833	$47,833	$157,167
2015		$157,167	40.00%	$62,867	$110,700	$94,300
Straight Line Method
Date	Accounts and explanation	Debit	Credit
Dec 31,2014	Depreciation expense	$                             23,333
	Accumulated Depreciation-Machine		$            23,333
	(Depreciation charged for 7 months of 2014)
Dec 31,2015	Depreciation expense	$                             40,000
	Accumulated Depreciation-Machine		$            40,000
	(Depreciation charged for 2015)
Units of Activity Method
Date	Accounts and explanation	Debit	Credit
Dec 31,2014	Depreciation expense	$                             28,000
	Accumulated Depreciation-Machine		$            28,000
	(Depreciation charged for 7 months of 2014)
Dec 31,2015	Depreciation expense	$                             76,000
	Accumulated Depreciation-Machine		$            76,000
	(Depreciation charged for 2015)
Double Declining Balance Method
Date	Accounts and explanation	Debit	Credit
Dec 31,2014	Depreciation expense	$                             47,833
	Accumulated Depreciation-Machine		$            47,833
	(Depreciation charged for 7 months of 2014)
Dec 31,2015	Depreciation expense	$                             62,867
	Accumulated Depreciation-Machine		$            62,867
	(Depreciation charged for 2015)