Question

A copy machine acquired with a cost of $1,410 has an estimated useful life of 4 years. It is also expected to have a useful operating life of 13,350 copies. Assuming that it will have a salvage value of $75, determine the depreciation for the first year and second year by the (15 points) (a) straight-line method (b) double-declining-balance method (c) units-of-output method (4,500 copies were made the first year 3,200 copies second year

Answer 1

• All working forms part of the answer
• Depreciation for Year 1 and Year 2 has been asked only.
• ‘A’ Straight Line Method

A	Cost	$              1,410.00
B	Residual Value	$                    75.00
C=A - B	Depreciable base	$              1,335.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$                  333.75

Year 1 = $ 333.75
Year 2 = $ 333.75

• ‘B’ Double Declining Balance Method

A	Cost	$              1,410.00
B	Residual Value	$                    75.00
C=A - B	Depreciable base	$              1,335.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$                  333.75
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value
1	$                1,410.00	50.00%	$               705.00	$                   705.00
2	$                    705.00	50.00%	$               352.50	$                   352.50

• ‘C’ Units of output method

A	Cost	$              1,410.00
B	Residual Value	$                    75.00
C=A - B	Depreciable base	$              1,335.00
D	Usage	13,350
E = C/D	Depreciation per copy	$                       0.10

Year	Book Value	No. of copies	Depreciation expense = No. of copies x $ 0.10
1	$                1,410.00	4,500	$               450.00
2	$                    960.00	3,200	$               320.00