In: Accounting
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
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 |