Question

Calculate the depreciation for the following scenarios.  Bought a piece of equipment costing $30,000, with a salvage value of $10,000.

a) Figure the SL depreciation for year one and year two.  Assuming a 10 year useful life.

b) Figure the units of production (activity) depreciation.  Assuming that total units will be 100,000.

                    Year 1 – 20,000 units

                    Year 2 -  30,000 units

c)Figure the double declining balance depreciation for year one and year two.  Assuming a 4 year life.

d) Figure the SL depreciation; assuming a 10 year life; if the equipment was purchased on July 1^st.

e) Prepare the Journal Entry for a (SL Depreciation)

Answer 1

Rreq a:
Cost of Equipment			30000
Less: Salvage value			10000
Depreciable cost			20000
Divide: Life			10
Annual depreciation			2000
		Depreciation expense
Year-1		2000
Year-2		2000
Req b:
Units of Production:
Cost of Equipment			30000
Less: Salvage value			10000
Depreciable cost			20000
Divide: Life			100000
Depreciation per unit			0.2
	Units	Depreciation expense
Year-1	20000	4000	(20000*0.2)
Year-2	30000	6000	(30000*0.2)
Req c:
DDB:
Rate of depreciation under DDB (100/4*2): 50%
Cost of assets			30000
Deprecition in Year-1			15000
Book value at end of Year-1			15000
Depreciation in Year-2			7500
		Depreciation expense
Year-1		15000
Year-2		7500
Req d:
Cost of Equipment			30000
Less: Salvage value			10000
Depreciable cost			20000
Divide: Life			10
Annual depreciation			2000
		Depreciation expense
Year-1		1000	(2000*6/12) for six months
Year-2		2000
Req e:
Journal entry for SLM depreciation:
Depreciation expense Dr.			1000
Accumulated depreciation				1000