Question

Blossom Ltd. purchased a new machine on April 4, 2014, at a cost of $ 197,600. The company estimated that the machine would have a residual value of $ 14,000. The machine is expected to be used for 10,200 working hours during its four-year life. Actual machine usage was 1,500 hours in 2014; 2,300 hours in 2015; 2,200 hours in 2016; 2,100 hours in 2017; and 2,100 hours in 2018. Blossom has a December 31 year end.

Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, e.g. 2.75 and final answers to 0 decimal places, e.g. 5,275.)

(1) Straight-line for 2014 through to 2018.

2014 Expense

2015 Expense

2016 Expense

2017 Expense

2018 Expense

(2) Diminishing-balance using double the straight-line rate for 2014 through to 2018.

2014 Expense

2015 Expense

2016 Expense

2017 Expense

2018 Expense

(3) Units-of-production for 2014 through to 2018.

2014 Expense

2015 Expense

2016 Expense

2017 Expense

2018 Expense

Answer 1

Requirement 1

Straight line Method
A	Cost	$           197,600.00
B	Residual Value	$              14,000.00
C=A - B	Depreciable base	$           183,600.00
D	Life [in years left )(30-15)=15	4
E=C/D	Annual SLM depreciation	$              45,900.00

Year	Book Value	Depreciation expense	Ending Book Value	Accumulated Depreciation
2014	$      197,600.00	$              34,425.00*	$ 163,175.00	$    320,000.00
2015	$      163,175.00	$              45,900.00	$ 117,275.00	$    365,900.00
2016	$      117,275.00	$              45,900.00	$    71,375.00	$    411,800.00
2017	$        71,375.00	$              45,900.00	$    25,475.00	$    457,700.00
2018	$        25,475.00	$              11,475.00**	$    14,000.00	$    469,175.00

*Depreciation is for 9 months in year 2014

**Depreciation is for 3 months in year 2018

Requirement 2

Double declining Method
A	Cost	$           197,600.00
B	Residual Value	$              14,000.00
C=A - B	Depreciable base	$           183,600.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$              45,900.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
2014	$      197,600.00	50.00%	$    74,100.00*	$    123,500.00	$           74,100.00
2015	$      123,500.00	50.00%	$    61,750.00	$      61,750.00	$        135,850.00
2016	$        61,750.00	50.00%	$    30,875.00	$      30,875.00	$        166,725.00
2017	$        30,875.00	50.00%	$    15,437.50	$      15,437.50	$        182,162.50
2018	$        15,437.50	50.00%	$       1,437.50**	$      14,000.00	$        183,600.00

*Depreciation is for 9 months in year 2014 ((197600 x 50%)/2)

**In year 2018 Depreciation will be an amount which makes book value to be equal to Residual value.

Requirement 3

Units of Usage Method
A	Cost	$           197,600.00
B	Residual Value	$              14,000.00
C=A - B	Depreciable base	$           183,600.00
D	Usage in units(in Hours)	10200
E	Depreciation per Hour	$ 18

Year	Book Value	Usage	Depreciation expense	Ending Book Value	Accumulated Depreciation
2014	$      197,600.00	1500	$    27,000.00	$    170,600.00	$           27,000.00
2015	$      170,600.00	2300	$    41,400.00	$    129,200.00	$           68,400.00
2016	$      129,200.00	2200	$    39,600.00	$      89,600.00	$        108,000.00
2017	$        89,600.00	2100	$    37,800.00	$      51,800.00	$        145,800.00
2018	$        51,800.00	2100	$    37,800.00	$      14,000.00	$        183,600.00