Question

An asset cost $13,000; estimated residual value, $1,000, and estimated life:

	Estimated Life	Actual usage
In years	5
In running time (hours)	3,000 hrs.	Year 1 = 700 hrs. Year 2 = 3200 hrs.
In productive output (units)	10,000 units	Year 1 = 2000 units Year 2 = 5000 units

Straight Line

Year	Depreciation Expense	Accumulated Depreciation	Cost	Net Book Value
Yr. 1				13,000
Yr. 1 end
Yr. 2

Service Hours

Year	Depreciation Expense	Accumulated Depreciation	Cost	Net Book Value
Yr. 1				13,000
Yr. 1 end
Yr. 2

Productive Output

Year	Depreciation Expense	Accumulated Depreciation	Cost	Net Book Value
Yr. 1				13,000
Yr. 1 end
Yr. 2

Productive output

Year	Depreciation Expense	Accumulated Depreciation	Cost	Net Book Value
Yr. 1				13,000
Yr. 1 end
Yr. 2

Calculate Depreciation

Answer 1

Straight line

Year	Depreciation Expense	Accumulated Depreciation	Cost	Net Book Value
Yr. 1			$          13,000	$            13,000
Yr. 1 end	$               2,400	$               2,400	$          13,000	$            10,600
Yr. 2	$               2,400	$               4,800	$          13,000	$               8,200

Service Hours
Depreciation = (Original Value- Salvage Value) / Total Life x Hours

Year	Depreciation Expense	Accumulated Depreciation	Cost	Net Book Value
Yr. 1			$          13,000	$            13,000
Yr. 1 end	$               2,800	$               2,800	$          13,000	$            10,200
Yr. 2	$               9,200	$            12,000	$          13,000	$               1,000

Maximum Depreciation is such that Net book value doesnot goes below Salvage Value

Productivity
Depreciation = (Original Value- Salvage Value) / Total Life x Units

Year	Depreciation Expense	Accumulated Depreciation	Cost	Net Book Value
Yr. 1			$          13,000	$            13,000
Yr. 1 end	$               2,400	$               2,400	$          13,000	$            10,600
Yr. 2	$               6,000	$               8,400	$          13,000	$               4,600