Question

On January 1, 2019, Chelsea Company purchased for $180,000 a new machine that has an estimated useful life of ten years (or 550,000 stamping operations), after which the expected salvage value is $10,000.

Under each of the following depreciation methods, calculate the depreciation expense for 2019.

Please show work :)

Required:

1. Straight-line depreciation
2. Double-declining balance depreciation
3. Units-of-production depreciation, if 66,000 stamping operations were made in 2019

Answer 1

Answer:

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

A	Cost	$ 180,000
B	Residual / Salvage Value	$   10,000
C	Number of years	10
(A-B)/C	Depreciation (SLM)	$   17,000

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

A	Cost	$ 180,000
C	Number of years	10
(100/C*2) =D	Depreciation Rate (Double declining method)	20%

Depreciation = 180,000 * 20% = $ 36,000

Now,

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

A	Cost	$ 180,000
B	Residual / Salvage Value	$   10,000
C	Expected Number of units	550,000
(A-B)/C	Depreciation Rate	$       0.31

Depreciation = 0.31 * 66,000 = $ 20,400

In case of any doubt or clarification, feel free to come back via comments.