Question

In: Accounting

Chapter 9 In Class Exercises: Depreciation Methods Scenario: Cost = Useful Life (Years) = Useful Life...

Chapter 9
In Class Exercises: Depreciation Methods

Scenario: Cost = Useful Life (Years) = Useful Life (Hours) = Salvage Value =

a) Calculate the SL annual rate:

30,000 5 140,000 2,000

1) Depreciable Cost = Cost - Salvage ValueDepreciable Cost = -

2) Calculate the Double DB rate:

SL Rate
x2 -

= Double DB rate

b) Calculate depreciation expense, accumulated depreciation and book value for the life of the

asset.
Depreciable Depreciation Annual Depr Accum.

Year Cost

Rate Exp Depr. Book Value

2010

2011

2012

2013

2014

= Depr. Cost

= Salvage Value

2) Method 2: Units of Activity
a) Calculate the Units of Activity rate:

b) Calculate depreciation expense, accumulated depreciation and book value for the life of the

asset.
Year Activity Rate

Annual Depr Exp

Accum.
Depr. Book Value

SL Rate =

x2 DDB Rate =

Units of Depreciation

2010

2011

2012

2013

2014

30,000

20,000

25,000

40,000

25,000

= Depr. Cost

= Salvage Value

140,000

3) Method 3: Double-Declining Balance

a) Calculate depreciation expense, accumulated depreciation and book value for the life of the asset.

Book Value Depreciation Annual Depr Accum.
Year Beg. Of Year Rate Exp Depr. Book Value

2010

2011

2012

2013

2014

30,000

= Salvage Value

PLUG

= Depr. Cost

Solutions

Expert Solution

Solution

Depreciation methods –

a. Calculation the SL annual rate:

Depreciation expense = depreciable base x SL rate

Cost = $30,000

Useful life = 5 years

SL annual rate = 1/5 = 20%

Depreciable base = cost – salvage value

Salvage value = $2,000

Depreciable base = 30,000 – 2,000 = $28,000

Annual depreciation expense = 28,000 x 20% = $5,600

SL Method

Year

Cost

Rate

Depreciation

Accumulated depreciation

book value

2010

$30,000

20%

$5,600

$5,600

$24,400

2011

$30,000

20%

$5,600

$11,200

$18,800

2012

$30,000

20%

$5,600

$16,800

$13,200

2013

$30,000

20%

$5,600

$22,400

$7,600

2014

$30000

20%

$5,600

$28,000

$2,000

b. Double DB rate –

Double DB rate = 2 x SL rate

= 2 x 20% = 40%

Depreciation expense, year 2010 = 30,000 x 40% = $12,000

Book value = cost – accumulated depreciation

BV at EOY 2010 = 30,000 – 12,000 = $18,000

2011

Depreciation = 18,000 x 40% = 7,200

Accumulated depreciation = 12,000 + 7,200 = 19,200

Book value = 30,000 – 19,200 = 10,800

2012

Depreciation = 10,800 x 40% = $4,320

Accumulated depreciation = 12,000 + 7,200 + 4,320 = $23,520

Book value = 30,000 – 23,520 = $6,480

2013

Depreciation = 6,480 x 40% = $2,592

Accumulated depreciation = 12,000 + 7,200 + 4,320 + 2,592 = $26,112

Book value = 30,000 – 26,112 = $3,888

2014

Depreciation = 3,888 x 40% = $1,555

Accumulated depreciation = 12,000 + 7,200 + 4,320 + 1,555 = $27,667

BV = 30,000 – 27,667 = $2,333

DDB Method

Year

Cost

Rate

Depreciation

Accumulated depreciation

book value

2010

$30,000

40%

$12,000

$12,000

$18,000

2011

$30,000

40%

$7,200

$19,200

$10,800

2012

$30,000

40%

$4,320

$23,520

$6,480

2013

$30,000

40%

$2,592

$26,112

$3,888

2014

$30000

40%

$1,555

$27,667

$2,333

Units-of-activity rate –

Depreciation expense = (depreciable base/useful life in hours) x hours used

Depreciable base = 30,000 – 2,000 = $28,000

Depreciation rate = 28,000/140,000 = $0.20 per hour

Depreciation expense = depreciation rate x units/hours

Units of Activity

Year

Cost

Units/hours

Depreciation

Accumulated depreciation

book value

2010

$30,000

30,000

$6,000

$6,000

$24,000

2011

$30,000

20,000

$4,000

$10,000

$20,000

2012

$30,000

25,000

$5,000

$15,000

$15,000

2013

$30,000

40,000

$8,000

$23,000

$7,000

2014

$30000

25,000

$5,000

$28,000

$2,000

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Chapter 11, #4 Depreciation methods and useful lives: Buildings—150% declining balance; 25 years. Equipment—Straight line; 10...
Chapter 11, #4 Depreciation methods and useful lives: Buildings—150% declining balance; 25 years. Equipment—Straight line; 10 years. Automobiles and trucks—200% declining balance; 5 years, all acquired after 2017. Leasehold improvements—Straight line. Land improvements—Straight line. Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2021 and other information: On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 19,000 shares of Cord's common stock. On this...
Cost $75,000; Salvage value: $10,000; Useful life: 10 Calculate annual depreciation on this machi... Cost $80,000;...
Cost $75,000; Salvage value: $10,000; Useful life: 10 Calculate annual depreciation on this machi... Cost $80,000; Salvage value: $10,000; Useful life: 10 Calculate annual depreciation on this machinery using doublr-declining balance method. Be careful not to exceed the salvage value. If the salvage value is zero, switch to straightline in the year when straight-line yields higher depreciation. (use the remaining valye as the starting point when you change)
Cost Salvage Value Useful Life Units of Production MACRS Class Life Asset #1 $        1,400,000 $          ...
Cost Salvage Value Useful Life Units of Production MACRS Class Life Asset #1 $        1,400,000 $           100,500 5 2016                  41,000 5 * Total units of 2017 48,000 output = 2018 26,000 160,000 On january 1st 2016, the company purchased the above asset. Then, calculate the annual depreciation for 2016, 2017, and 2018 assuming they were all purchased June 1st, 2016. Show all of your work.
Chapter 9 Programming Project (Inheritance, Abstract Class/Methods, Overriding Methods) -For all classes, you need to provide...
Chapter 9 Programming Project (Inheritance, Abstract Class/Methods, Overriding Methods) -For all classes, you need to provide the accessor and mutator methods for all instance variables, and provide/override the toString methods. -Create a Customer class that has the attributes of name and age. Provide a method named importanceLevel. Based on the requirements below, I would make this method abstract. -Extend Customer to two subclasses: FlightCustomer, and RetailCustomer -FlightCustomer attributes: ticketPrice, seatNumber (The seat number should be a randomly generated number between...
2.1 A machine costing R120 000 has a useful life of five years (20% depreciation). Calculate...
2.1 A machine costing R120 000 has a useful life of five years (20% depreciation). Calculate the asset’s depreciation for all five years using both the straight-line method and diminishing balance method. Also, discuss the difference between the two methods and provide an appropriate example to explain how one would choose the appropriate method to use.
A grader has an initial cost of $220,000 and an estimated useful life of 10 years....
A grader has an initial cost of $220,000 and an estimated useful life of 10 years. The salvage value after 10 years of use is estimated to be $25,000. What is the annual depreciation amount in the fourth year if the sum-of-the-years method of depreciation accounting is used? Select one: a. $19,500.00 b. $24,818.18 c. $28,363.64 d. $99,454.55
Question: An asset has a useful life of 3 years. cost of the asset is $2000....
Question: An asset has a useful life of 3 years. cost of the asset is $2000. Residual value is $500. the asset can be used for a total of 1500 hours. it is used for 650 hours in the first year of operations and for 600 hours in the second year. Depreciation expense for the three years will be as follows: Calculate annual depreciation for the first and second year of the operations using (1) straight-line method (2) Units of...
Consider an asset with the cost basis of $500,000, useful life of 5 years and salvage...
Consider an asset with the cost basis of $500,000, useful life of 5 years and salvage value of 10,000 at the end of its useful life. This asset generates yearly revenue of $275,000 and its operating cost is $55,000 per year. Average inflation rate is estimated to be 4% over the next 5 years. Calculate tax saving in year 2 due to depreciation; if the double declining method is used for depreciation (tax rate is 30%). (Report your answer in...
A loader has an initial cost of $154,000 and an estimated useful life of 8 years....
A loader has an initial cost of $154,000 and an estimated useful life of 8 years. The salvage value after 8 years of use is estimated to be $10,000. a. What is the annual depreciation amount if the straight-line method of depreciation accounting is used? b. What is the book value after 6 years if the straight-line method of depreciation accounting is used? c. What is the annual depreciation amount in the fifth year if the sum-of-the-years method of depreciation...
A project has a cost of $10 million, a useful life of 30 years, annual operation...
A project has a cost of $10 million, a useful life of 30 years, annual operation and maintenance costs equal 2% of the capital cost, and annual benefit of $1.5 million.. 1. Find the simple payback period of the project. 2. Find out benefit-cost ratio if the discount rate is 10%
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT