Question

On January 1, 2018, a machine was purchased for $102,500. The machine has an estimated salvage value of $7,580 and an estimated useful life of 5 years. The machine can operate for 113,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 22,600 hrs; 2019, 28,250 hrs; 2020, 16,950 hrs; 2021, 33,900 hrs; and 2022, 11,300 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

Base for SLM, Activity method, SOY digit method
Cost - estimated salvage value	$            94,920
SLM depreciation
Base	$            94,920
Life of an asset years	5
Depreciation each year	$            18,984
Base	$            94,920
Total capacity of machine in hours	113,000
Depreciation per hour	0.84
Year	Activity hours	Depreciation
2018	22,600	$          18,984
2019	28,250	$          23,730
2020	16,950	$          14,238
2021	33,900	$          28,476
2022	11,300	$            9,492
SOY digit method
Year	SOY digit no. of years left / n(n+1)/2	Depreciation = Base * SOY %
2018	33%	$          31,640
2019	27%	$          25,312
2020	20%	$          18,984
2021	13%	$          12,656
2022	7%	$            6,328
% for double declining (2 X 1/5 *100)	40%
Year	Depreciation	Carrying value
2018 Beginning		$        102,500
2018	$            41,000	$          61,500
2019	$            24,600	$          36,900
2020	$            14,760	$          22,140
2021	$              8,856	$          13,284
2022	$              5,314	$            7,970

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