Question

Q3- Abdulaziz company purchased a machine in 2013 for 50,000 that has a useful life of 5 years with a salvage value of 5,000

Calculate the depreciation expense, accumulated depreciation, book value throughout its useful life using:

1- Straight-line method.

2- Units of Production method if the machine produces 100,000 units.

Here is a table of units produced each year:

First	Second	Third	Fourth	Fifth
23,000	25,000	-	30,000	22,000

3- Double Declining balance method.

Answer 1

Answer 1 : Straight-line method = (Cost - Salvage value) / Estimated useful life

= ($50,000 - $5,000) / 5 years = $9,000

Year	Book Value Year Start	Depreciation Expense	Accumulated Depreciation	Book Value Year End
2013	$50,000	$9,000	$9,000	$41,000
2014	$41,000	$9,000	$18,000	$32,000
2015	$32,000	$9,000	$27,000	$23,000
2016	$23,000	$9,000	$36,000	$14,000
2017	$14,000	$9,000	$45,000	$5,000

Answer 2 : Units of Production method :

Depreciation cost per unit = (Cost - Salvage value) / Estimated total units

= ($50,000 - $5,000) / 100,000 units = $0.45 per unit.

Year	Book Value Year Start	Depreciation Expense [Depreciation cost per unit * units]	Accumulated Depreciation	Book Value Year End
2013	$50,000	($0.45 per unit. * 23,000 units) = $10,350	$10,350	$39,650
2014	$39,650	($0.45 per unit. * 25,000 units) = $11,250	$21,600	$28,400
2015	$28,400	($0.45 per unit. * 0 units) = $0	$21,600	$28,400
2016	$28,400	($0.45 per unit. * 30,000 units) = $13,500	$35,100	$14,900
2017	$14,900	($0.45 per unit. *22,000 units) = $9,900	$45,000	$5,000

Answer 3 :

Double Declining balance method :

Dep Rate = [1 / Estimated useful life] * 2 =[ 1 / 5 years ] * 2 = 40 %

Depreciation : Dep Rate * Book Value Year Start

Year	Depreciation %	Book Value Year Start	Depreciation Expense	Accumulated Depreciation	Book Value Year End
2013	40 %	$50,000	$20,000	$20,000	$30,000
2014	40 %	$30,000	$12,000	$32,000	$18,000
2015	40 %	$18,000	$7,200	$39,200	$10,800
2016	40 %	$10,800	$4,320	$43,520	$6,480
2017	40 %	$6,480	($6,480 - $5,000) [Note 1] = $1,480	$45,000	$5,000

Note 1 : Under Double Declining balance method , depreciation ceases when book value equals salvage value