Question

Bramble Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $150,900. The company estimated that the machine would have a salvage value of $15,900 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 22,500 hours. Year-end is December 31.

Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.)

(a)		Straight-line depreciation for 2020		$enter a dollar amount
(b)		Activity method for 2020, assuming that machine usage was 750 hours		$enter a dollar amount
(c)		Sum-of-the-years'-digits for 2021		$enter a dollar amount
(d)		Double-declining-balance for 2021		$enter a dollar amount

Answer 1

(a)	Straight Line Depreciation for 2020	=	$                  11,250
(b)	Activity method for 2020	=	$                    4,500
(c)	Sum - of - year digits method for 2021	=	$                  54,000
(d)	Double - declining balance method for 2021	=	$                  50,300

	Workings:
(a)	Straight Line method:-
	Depreciation expense	=	(Cost - Residual value) / useful value
		=	($150900 - $15900) / 5 years
		=	$                  27,000	per year
	Straight Line Depreciation for 2020	=	$27000 X 5/12
	Depreciation expense	=	$                  11,250
(b)	Units of Activity method:-
	Depreciation expense	=	(Cost - Residual value) / useful value in hours
		=	($150900 - $15900) / 22500 hours
		=	$                      6.00
	Activity method for 2020	=	750 hours X $6
		=	$                    4,500
(c)	Sum - of - year digits method for 2021
	[n*(n+1)] / 2	=	[5*(5+1)] / 2
		=	15
Year	Depreciable amount	Fraction	Depreciation expense
2020	$                                                                             1,35,000	5/15 X 5/12	$                  18,750
2021	$                                                                             1,35,000	6/15	$                  54,000
(d)	Double - declining balance method for 2021
	Double declining rate	=	(100% / 5 years) X 2
		=	40.00%
Year	Beginning of period book value	Depreciation rate	Depreciation expense
2020	$                                                                             1,50,900	40.00%	$                  25,150
2021	$                                                                             1,25,750	40.00%	$                  50,300