Question

On January 1, 2018, Canseco Plumbing Fixtures purchased equipment for $58,000. Residual value at the end of an estimated four-year service life is expected to be $10,000. The company expects the machine to operate for 15,000 hours. The machine operated for 3,600 and 4,400 hours in 2018 and 2019, respectively.

a. Calculate depreciation expense for 2018 and 2019 using straight line method. (don't need)
b. Calculate depreciation expense for 2018 and 2019 using sum-of-the-years'-digits method.

	Sum-of-the-years' digits depreciation Depreciable Base x Rate per Year = Depreciation Expense 2018 x = 2019 x =

C. Calculate depreciation expense for 2018 and 2019 using double-declining balance method.

	Depreciation for the Period End of Period Annual Period Beginning of Period Book Value Depreciation Rate (%) Depreciation Expense Accumulated Depreciation Book Value 2018 2019

d. Calculate depreciation expense for 2018 and 2019 using units-of-production method (using machine hours).
  

(Round "Depreciation per machine hour" answers to 2 decimal places.)

	Select formula for Units of Production Depreciation: Calculate 2018 depreciation expense: Depreciation per machine hour Machine hours in 2018 Depreciation in 2018 Calculate 2019 depreciation expense: Depreciation per machine hour Machine hours in 2019 Depreciation in 2019

Answer 1

• Workings

A	Cost	$ 58,000.00
B	Residual Value	$ 10,000.00
C=A - B	Depreciable base	$ 48,000.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$ 12,000.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

• Requirement [a]

Straight Line Depreciation
Choose Numerator	Choose Denominator	Annual Depreciation expense
Cost minus Salvage	Estimated useful life [years]	Depreciation expense
$       48,000.00	4	$       12,000.00
Year	Depreciation expense
2018	$           12,000.00
2019	$           12,000.00

• Requirement [b]
  Sum = 1 + 2 + 3 + 4 = 10

Sum of the year Digit Depreciation
	Depreciable base	Rate per year	Depreciation expense
2018	$           48,000.00	4 / 10	$                19,200.00
2019	$           48,000.00	3 / 10	$                14,400.00

• Requirement [c]

Double Declining
Annual Period	Beginning Book Value	Depreciation %	Depreciation expense	Accumulated Depreciation	Book Value [end]
2018	$           48,000.00	50.00%	$                24,000.00	$ 24,000.00	$ 24,000.00
2019	$           24,000.00	50.00%	$                12,000.00	$ 36,000.00	$ 12,000.00

• Requirement [d]

Units of Production Depreciation:
(Cost - Salvage) / Total units of production
$       48,000.00	15000 hours	$ 3.20 per hour
Calculate 2018 Depreciation expense:
Depreciation per MH	$                      3.20
MH in 2018	3,600
Depreciation in 2018	$           11,520.00
Calculate 2019 Depreciation expense:
Depreciation per MH	$                      3.20
MH in 2019	4,400
Depreciation in 2019	$           14,080.00