Question

On January 1, 2015, a machine was purchased for $107,100. The machine has an estimated salvage value of $7,140 and an estimated useful life of 5 years. The machine can operate for 119,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 23,800 hrs; 2016, 29,750 hrs; 2017, 17,850 hrs; 2018, 35,700 hrs; and 2019, 11,900 hrs.

Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods.

Year		Straight-line Method		Sum-of-the-years'-digits method		Double-declining-balance method
2015		$		$		$
2016
2017
2018
2019
2020

Answer 1

Straight line Method
Cost of Machine	$    107,100
Less: Salvage value	$    (7,140)
Depreciable value	$    99,960
Life of Asset	5 Years
Depreciation per year ($99,960/5)	$    19,992
Depreciation for 2015 ($19,992/12*9)	$       14,994
Depreciation for 2016	$    19,992
Depreciation for 2017	$    19,992
Depreciation for 2018	$    19,992
Depreciation for 2019	$    19,992
Depreciation for 2020 ($19,992/12*3)	$         4,998

Year	Cost of the assets	Salvage value	Depreciable value	sum of the year	Depreciation
2015	$                 107,100	$              7,140	$                     99,960	1+2+3+4+5 = 15	($99,960*5/15*9/12) = $24,990
2016	$                 107,100	$              7,140	$                     99,960	1+2+3+4+5 = 15	($99,960*5/15*3/12)+($99,960*4/15*9/12) = $28,322
2017	$                 107,100	$              7,140	$                     99,960	1+2+3+4+5 = 15	($99,960*4/15*3/12)+($99,960*3/15*9/12) = $21,658
2018	$                 107,100	$              7,140	$                     99,960	1+2+3+4+5 = 15	($99,960*3/15*3/12)+($99,960*2/15*9/12) = $14,994
2019	$                 107,100	$              7,140	$                     99,960	1+2+3+4+5 = 15	($99,960*2/15*3/12)+($99,960*1/15*9/12) = $8,330
2020	$                 107,100	$              7,140	$                     99,960	1+2+3+4+5 = 15	($99,960*1/15*3/12) = $1,666

Depreciation under DDB Method
Year - a	Net Book value, beginning of year - b	Double declained depreciation - c = b/Life of assets*2	Net book value, End of the year - d = b-c
2015	$           107,100.00	$107,100/5*2*9/12 = $32,130	$           74,970.00
2016	$                74,970.00	$                                       29,988.00	$           44,982.00
2017	$                44,982.00	$                                       17,992.80	$           26,989.20
2018	$                26,989.20	$                                       10,795.68	$           16,193.52
2019	$                16,193.52	$                                         6,477.41	$             9,716.11
2020	$                  9,716.11	$                                         2,576.11	$             7,140.00