Question

Carla Vista Ltd. purchased a new machine on April 4, 2014, at a cost of $162,400. The company estimated that the machine would have a residual value of $18,000. The machine is expected to be used for 9,500 working hours during its four-year life. Actual machine usage was 1,400 hours in 2014; 2,100 hours in 2015; 2,300 hours in 2016; 2,000 hours in 2017; and 1,700 hours in 2018. Carla Vista has a December 31 year end.

Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, e.g. 2.75 and final answers to 0 decimal places, e.g. 5,275.)

(1) Straight-line for 2014 through to 2018.

2014 expense $

2015 expense $

2016 expense $

2017 expense $

2018 expense

(2) Diminishing-balance using double the straight-line rate for 2014 through to 2018.

2014 expense $

2015 expense $

2016 expense $

2017 expense $

2018 expense

(3) Units-of-production for 2014 through to 2018.

2014 expense $

2015 expense $

2016 expense $

2017 expense $

2018 expense

Answer 1

1.

2014	27075
2015	36100
2016	36100
2017	36100
2018	9025

Working:

Cost of the asset	162400
Salvage Value	18000
Depreciable value	144400
Estimated life - years	4
Annual depreciation rate - Straight Line	25%
Date of purchase	4/2/2014
Period in 2014	9 months
Straight line depreciation
2014   - 144,400x 25% x 9 / 12	27075
2015 - Full year	36100
2016 - Full year	36100
2017 - Full year	36100
2018 - 144,400x 25% x 3 / 12	9025

2.

2014	101500
2015	50750
2016	25375
2017	12688
2018	4758

Working:

2014
Cost of the asset	162400
Rate of depreciation	50%
Period	9 monhts
Depreciation expense for the year	60900
Book value at the end of the year	101500
2015
Book value at the beginning of the year	101500
Rate of depreciation	50%
Depreciation expense for the year	50750
Book value at the end of the year	50750
2016
Book value at the beginning of the year	50750
Rate of depreciation	50%
Depreciation expense for the year	25375
Book value at the end of the year	25375
2017
Book value at the beginning of the year	25375
Rate of depreciation	50%
Depreciation expense for the year	12688
Book value at the end of the year	12688
2018
Book value at the beginning of the year	12688
Rate of depreciation	50%
Period	3 months%
Depreciation expense for the year	4758
Book value at the end of the year	7930

3.

2014	21280
2015	31920
2016	34960
2017	30400
2018	25840

Working:

2014
Cost of the asset	162400
Salvage Value	18000
Depreciable value	144400
Life of the asset - machine hours	9500
Depreciation rate per machine hour	15.2
Machine hours used in 2014	1400
Depreciation expense for 2014	21280
2015
Depreciation rate per machine hour	15.2
Machine hours used in 2015	2100
Depreciation expense for 2015	31920
2016
Depreciation rate per machine hour	15.2
Machine hours used in 2016	2300
Depreciation expense for 2016	34960
2017
Depreciation rate per machine hour	15.2
Machine hours used in 2017	2000
Depreciation expense for 2017	30400
2018
Depreciation rate per machine hour	15.2
Machine hours used in 2018	1700
Depreciation expense for 2018	25840