Question

1. Jalloh Company purchased machinery for $162,000 on January 1, 2017. It is estimated that the machinery will have a useful life of 20 years, salvage value of $15,000, production of 84,000 units, and working hours of 42,000. During 2017, the company uses the machinery for 14,300 hours, and the machinery produces 20,000 units. Compute depreciation under the straight-line, unit of output, working hours, sum of the year’s digits, and double-declining balance methods.

Answer 1

Answer

Depreciation (as per SLM) = (Cost - salvage value) / Number of years

A	Cost	$ 162,000
B	Residual / Salvage Value	$   15,000
C	Number of years	20
(A-B)/C	Depreciation (SLM)	$     7,350

Depreciation rate (as per Units of production method) = (Cost - salvage value) / Total expected units

A	Cost	$ 162,000
B	Residual / Salvage Value	$   15,000
C	Expected Numer of units	84,000
(A-B)/C	Depreciation Rate	$       1.75

Depreciation = 1.75 * 20,000 = $ 35,000

Depreciation rate (as per Working hours method) = (Cost - salvage value) / Total expected hours

A	Cost	$ 162,000
B	Residual / Salvage Value	$   15,000
C	Expected Numer of units	42,000
(A-B)/C	Depreciation Rate	$       3.50

Depreciation = 3.5*14,300 = $ 50,050

Depreciation rate (as per Sum of Years Digits method) = (Cost - salvage value) / Sum of Years

A	Cost	$ 162,000
B	Residual / Salvage Value	$   15,000
C	Expected life	20
D	Sum of Digits (1+2+3+…20)	210
(A-B)/D	Depreciation Rate	$   700.00

Depreciation = 20*700 = $ 14,000

Depreciation Rate (as per double declining method) = 100 / Years * 2

A	Cost	$ 162,000
C	Number of years	20
(100/C*2) =D	Depreciation Rate (Double declining method)	10%

Year	Value at the beginning	Depreciation every year	Accumulated depreciation	Value at the end
1	$                       162,000	$                            16,200	$                                 16,200	$            145,800