Question

Hackel Industries presents you with the following information.

Description	Date Purchased	Cost	Salvage Value	Life in Years	Depreciation method	Accumulated Depreciation on 12/31/21	Depreciation for 2022
Machine A	2/1/20	$142,500	$16,000	10	(a)	$41,975	(b)
Machine B	8/1/20	(c)	21,000	5	SL	85,000	(d)
Machine C	7/31/20	75,400	23,500	8	DDB	(e)	(f)
Machine D	10/1/(g)	219,000	69,000	5	SYD	97,500	(h)

Required:

Complete the table.

Answer 1

SOLUTION:

DESCRIPTION	DATE PURCHASED	COST	SALVAGE VALUE	LIFE IN YEARS	DEPRECIATION METHOD	ACCUMULATED DEPRECIATION ON 12/31/2021	DEPRECIATION FOR 2022
MACHINE A	2/1/2020	$142500	$16000	10	SYD	$41975	$18591.67
MACHINE B	8/1/2020	621000	21000	5	SL	85000	120000
MACHINE C	7/31/2020	75400	23500	8	DDB	24740.63	12664.84
MACHINE D	10/1/2019	219000	69000	5	SYD	97500	27500

MACHINE A

sum of the years digits method(SYD)

SYD= 1+2+3+4+5+6+7+8+9+10 = 55

Depreciable amount = cost-salvage value= 142500-16000=$126500

Depreciation expenses for 2020= (10/55)*126500*(11/12)=$21083.33

Depreciation expenses for 2021= (10/55)*126500*(11/12) + (9/55)*126500*(11/12)=$20891.67

accumulated depreciation on 12/31/2021= 21083.33+20891.67= $41975

Depreciation expenses for 2022= (9/55)*126500*(1/12) + (8/55)*126500*(11/12)= $18591.67

MACHINE B

Straight line method(SL)

Accumulated depreciation on 12/31/2021 = (depreciation expense each year)*(no of years from the date of purchase)

85000=(depreciation expenses each year)*(17/24)

depreciation expense each year = 85000*(24/17) = $120000

depreciation expense each year= (cost -salvage value)/useful life

120000=(cost -21000)/5

cost = (120000*5)+21000=$621000

depreciation expense for 2022= $120000*(12/12)=$120000

MACHINE C

double declining balance method(DDB)

SL Depreciation rate = (1/useful life)*100=(1/8)*100=12.5%

DDB Depreciation rate=2*(SL Depreciation rate)= 2*12.5%= 25%

.

	year1	year2
begining book value	$75400	$67545.83
depreciation expenseaaaa$	$75400*25%*(5/12)=$7854.17	$67545.83*25% * (12/12)=$16886.46
ending book value	75400-7854.17=$67545.83	67545.83-16886.46=$50659.37

accumulated depreciation on 12/31/2021= 7854.17+16886.46=$24740.63

Depreciation expenses for 2022=50659.37*25% * (12/12)= $12664.84

MACHINE D

sum of the years digits method (SYD)

SYD= 1+2+3+4+5= 15

depreciable amount=cost-salvage value= 219000-69000= $150000

year	depreciation expense
2019	(5/15)*150000*(3/12)= $12500
2020	[(5/15)*150000*(9/12)] + [(4/15)*150000*(3/12)]=$47500
2021	[(4/15)*150000*(9/12)] + [(3/15)*150000*(3/12)]=$37500
2022	[(5315)*150000*(9/12)] + [(2/15)*150000*(3/12)]=$27500

Accumulated depreciation on 12/31/2021=12500+47500+37500=$97500

MACHINE D was purchased in the year 2019

Depreciation expense for 2022 = $27500