Question

Strong Metals Inc. purchased a new stamping machine at the beginning of the year at a cost of $1,330,000. The estimated residual value was $70,000. Assume that the estimated useful life was five years and the estimated productive life of the machine was 300,000 units. Actual annual production was as follows:

Year	Units
1	70,000
2	67,000
3	50,000
4	73,000
5	40,000

Required:

1. Complete a separate depreciation schedule for each of the alternative methods.

year	depreaction expense	accumulated deprecation	net book vaule
at accuisition
1
2
3
4
5

a. Straight-line.

b. Units-of-production.

c. Double-declining-balance.

Answer 1

Actual cost of stamping machine	$                  1,330,000
Estimated residual value	$                        70,000
Depreciable value	$                  1,260,000
Straight-line depreciation
Estimated useful life in years	5
Annual straight line depreciation rate	20.00%
Annual depreciation	1260000/5
Annual depreciation	$                      252,000
Accumulated depreciation= Accumulated depreciation in previous year + depreciation for the year
Netbook value= Net book value in the previous year - depreciation for the year
Year	Depreciation expense	Accumulated depreciation	Net book value
0	$                                 -	$                                         -	$       1,330,000
1	$                      252,000	$                              252,000	$       1,078,000
2	$                      252,000	$                              504,000	$          826,000
3	$                      252,000	$                              756,000	$          574,000
4	$                      252,000	$                           1,008,000	$          322,000
5	$                      252,000	$                           1,260,000	$            70,000
Double declining depreciation
Estimated useful life in years	5
Annual straight line depreciation rate	20.00%
The double-declining depreciation rate	40.00%
Accumulated depreciation= Accumulated depreciation in previous year + depreciation for the year
Netbook value= Net book value in the previous year - depreciation for the year
Depreciation= Net book value in previous year * depreciation rate
Year	Depreciation expense	Accumulated depreciation	Net book value
0	$                                 -	$                                         -	$       1,330,000
1	$                      532,000	$                              532,000	$          798,000
2	$                      319,200	$                              851,200	$          478,800
3	$                      191,520	$                           1,042,720	$          287,280
4	$                      114,912	$                           1,157,632	$          172,368
5	$                        68,947	$                           1,226,579	$          103,421
Units of production
Accumulated depreciation= Accumulated depreciation in previous year + depreciation for the year
Netbook value= Net book value in the previous year - depreciation for the year
Depreciation= depreciatiable value * depreciation rate
Year	Units	Percentage
1	70,000	23.33%
2	67,000	22.33%
3	50,000	16.67%
4	73,000	24.33%
5	40,000	13.33%
Total	300,000
Year	Depreciation expense	Accumulated depreciation	Net book value
0	$                                 -	$                                         -	$       1,330,000
1	$                      294,000	$                              294,000	$       1,036,000
2	$                      281,400	$                              575,400	$          754,600
3	$                      210,000	$                              785,400	$          544,600
4	$                      306,600	$                           1,092,000	$          238,000
5	$                      168,000	$                           1,260,000	$            70,000