In: Accounting
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 1st.
e) Prepare the Journal Entry for a (SL Depreciation)
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 | |||||