Question

BBK Company bought an equipment to manufacture machine parts for Rs 5,600,000. The equipment was expected to be useful for 5 years and an estimated residual value of Rs

280,000. The equipment is expected to manufacture 350,000 parts. It manufactured 105,000 parts in year 1; 84,000 in year 2; 21,000 in year 3; 112,000 in year 4 and 28,000 parts in year 5.

Required:

Compute the depreciation expense for each year under the following methods:
(a) Straight-line;(b)Written-down-value;(c)Productionunits

Answer 1

Ans. A	Straight line depreciation = (Cost of asset - Residual value) / Useful life in years
		($5,600,000 - $280,000) / 5
		$5,320,000 / 5
		$1,064,000
	*In Straight line method the depreciation is equal in each year.
	Year	Depreciation
	1	$1,064,000
	2	$1,064,000
	3	$1,064,000
	4	$1,064,000
	5	$1,064,000