Question

On January 1, 2018, a machine was purchased for $122,500. The machine has an estimated salvage value of $7,300 and an estimated useful life of 5 years. The machine can operate for 120,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 24,000 hrs; 2019, 30,000 hrs; 2020, 18,000 hrs; 2021, 36,000 hrs; and 2022, 12,000 hrs.

Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.)

1.		Straight-line Method		$
2.		Activity Method
		Year
		2018		$
		2019		$
		2020		$
		2021		$
		2022		$
3.		Sum-of-the-Years'-Digits Method
		Year
		2018		$
		2019		$
		2020		$
		2021		$
		2022		$
4.		Double-Declining-Balance Method
		Year
		2018		$
		2019		$
		2020		$
		2021		$
		2022		$

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Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.)

Year		Straight-line Method		Sum-of-the-years'-digits method		Double-declining-balance method
2018		$		$		$
2019
2020
2021
2022
2023

Answer 1

1.Straight line method:

By putting the values in formual we get the depreciation amount :-  

Formula =( Cost of the asset-Salvage value) / Estimated useful life of the asset

= ($ 122500- $ 7300) / 5

=$ 115200 / 5

=$ 23040

Every year the depreciation expenses will be $23040 for 5 year under Staight line method.

2.Activity method

Formula=((Cost of the asset- Salvage value of asset) * Actual Activity) /Toal estimated life time activity of the assets.

* Here activity means productive hours

By putting the values in formual we get the depreciation amount

Year 2018 =(($ 122500 - $ 7300) * 24000)/120000

=$23040

Year 2019 =(($ 122500 - $ 7300) * 30000)/120000

=$28800

Year 2020 =(($ 122500 - $ 7300) * 18000)/120000

=$17280

Year 2021 =(($ 122500 - $ 7300) * 36000)/120000

=$34560

Year 2022 =(($ 122500 - $ 7300) * 12000)/120000

=$11520

3. Sum -of -the- years' -digit method

Formula =( Remaining useful life of assets/ Sum of the years' digit) * Depreciable Cost

Sum of the years digit= (n(n+1)) / 2 ; n= estimated life of the assets

= (5(5+1)) /2

=30 / 2

= 15

Depreciable cost = cost of assets - salvage value

By putting the values in formual we get the depreciation amount

Year 2018 = 5 /15 *115200= $ 38400

Year 2019 = 4 /15 *115200= $ 30720

Year 2020= 3 /15 *115200= $ 23040

Year 2021= 2 /15 *115200= $ 15360

Year 2022= 1 /15 *115200= $ 7680

4.Double declining Balance method

Formula = 2 * SLDP * BV

SLDP= Straight line depreciation percent

SLDP=( Depreciation value / Depreciable cost) * 100

=23040/115200 * 100

= 20 %

Depreciable cost = cost of asets- salvage value

= $122500 - $7300

= $115200

BV= Book value of the at the begining of the period

By putting the values in formual we get the depreciation amount

Year 2018 = 2* 20%* 122500= $ 49000; Book value at begining = $115200

Year 2019 = 2* 20%* 73500= $ 29400; Book value at begining= $122500 - $ 49000= $73500

Year 2020= 2* 20%* 44100= $ 17640; Book value at begining= $73500- $29400= $44100

Year 2021= 2* 20%* 26460= $ 10584; Book value at begining= $44100- $17640= $27648

Year 2022= 2* 20%* 15876= $ 6350; Book value at begining= $26460- $10584= $15876