Question

On January 1, 2015, a machine was purchased for $90,900. The machine has an estimated salvage value of $6,060 and an estimated useful life of 5 years. The machine can operate for 101,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 20,200 hrs; 2016, 25,250 hrs; 2017, 15,150 hrs; 2018, 30,300 hrs; and 2019, 10,100 hrs.

Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.)

Year Straight-line Method Sum-of-the-years'-digits method Double-declining-balance method

2015

2016

2017

2018

2019

2020

Answer 1

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A Machine
Straight Line		Note
Purchase cost of machine	90,900.00	A
Less: Residual Value	6,060.00	B
Depreciable Cost	84,840.00	C=A-B
Life (Years)	5.00	D
Annual Depreciation	16,968.00	E=C/D
Depreciation for 2015 (Jan to Sep, 9 months)	12,726.00	F=E/12*9
Depreciation for 2016	16,968.00	See E
Depreciation for 2017	16,968.00	See E
Depreciation for 2018	16,968.00	See E
Depreciation for 2019	16,968.00	See E
Depreciation for 2020	4,242.00	G=E/12*3
Sum of years digit method		Note
Life (years)	5.00	See D
Sum of years	15.00	H
Depreciable Cost	84,840.00	See C
Depreciation for 2015	28,280.00	I=C/H*D
Depreciation for 2016	22,624.00	J=C/H*4
Depreciation for 2017	16,968.00	K=C/H*3
Depreciation for 2018	11,312.00	L=C/H*2
Depreciation for 2019	5,656.00	M=C/H
Depreciation for 2020	-
Double Declining Method		Note
Total cost	90,900.00	See A
Life	5.00	See D
Annual depreciation	18,180.00	N=A/D
Depreciation rate	20.00%	O=N/A
Double Depreciation %	40.00%	P=O*2
Depreciation for 2015	36,360.00	Q=A*P
Depreciation for 2015 (Jan to Sep, 9 months)	27,270.00	R=Q/12*9
Book value at the end of 2015	63,630.00	S=A-R
Depreciation for 2016	25,452.00	T=P*S
Book value at the end of 2016	38,178.00	U=S-T
Depreciation for 2017	15,271.00	V=U*P
Book value at the end of 2017	22,907.00	W=U-V
Depreciation for 2018	9,163.00	X=W*P
Book value at the end of 2018	13,744.00	Y=W-X
Depreciation for 2019	5,498.00	Z=Y*P
Book value at the end of 2019	8,246.00	AA=Y-Z
Depreciation for 2020	2,186.00	AB=AA-B
Book value at the end of 2020	6,060.00	AC=AA-AB