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Red Company purchased a machine on January 1, 2018.

Cost $210,000

Residual value 24,000

Useful life in years 5 *

Useful life in hours 25,000

*Write the formulas assuming useful life in years will always be five years Useful life in hours 25,000 but that the other three amounts given may vary.

Determine the annual depreciation expense under each of four depreciation methods

	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022
Hours used	4,800	4,900	5,200	5,500	5,300
Straight line
Units of production
Double-declining balance
Sum-of-the-years’-digits

   Determine the machine's book value at the end of each year under each of the four depreciation methods

	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022
Straight line
Units of production
Double-declining balance
Sum-of-the-years’-digits

Answer 1

Cost	$210,000
Useful Life	5 years
Residual Value	24000
Useful Life in hours	25000
Straight Line Depreciation per year		(Cost-Salvage Value)/ Life
		(210000-24000)/5
		$37,200	per year
Depreciable Amount	210000-24000		$186,000
Units of production
Year	Hours	Depreciation per year	Formula
Dec 31,2018	4800	$35,712	(4800*186000/25000)
Dec 31,2019	4900	$36,456	(4900*186000/25000)
Dec 31,2020	5200	$38,688	(5200*186000/25000)
Dec 31,2021	5500	$40,920	(5500*186000/25000)
Dec 31,2022	5300	$34,224	(186000-35712-36456-38688-40920)
Double Declining method
Rate	100%/5	0.2
Depreciation Rate	20%*2	40%
Year	Book Value	Depreciation per year
Dec 31,2018	210000	$84,000	(210000*40%)
Dec 31,2019	$126,000	$50,400	(126000*40%)
Dec 31,2020	$75,600	$30,240	(75600*40%)
Dec 31,2021	$45,360	$18,144	(45360*40%)
Dec 31,2022	$27,216	$3,216	(27216-24000)
Years of Digit
Total Digits	5+4+3+2+1
Year	Digits	Depreciation per year
Dec 31,2018	5	$62,000	(186000*5/15)
Dec 31,2019	4	$49,600	(186000*4/15)
Dec 31,2020	3	$37,200	(186000*3/15)
Dec 31,2021	2	$24,800	(186000*2/15)
Dec 31,2022	1	$12,400	(186000*1/15)
Annual Depreciation
	Dec 31,2018	Dec 31,2019	Dec 31,2020	Dec 31,2021	Dec 31,2022
Straight Line	37,200.00	37,200.00	37,200.00	37,200.00	37,200.00
Units of Production	35,712.00	36,456.00	38,688.00	40,920.00	34,224.00
Double Declining	84,000.00	50,400.00	30,240.00	18,144.00	3,216.00
Sum of years digit	62,000.00	49,600.00	37,200.00	24,800.00	12,400.00
Book Value	( Book Value at Beginning- Depreciation for the year)
	Dec 31,2018	Dec 31,2019	Dec 31,2020	Dec 31,2021	Dec 31,2022
Straight Line     (210000-37200)	172,800.00	135,600.00	98,400.00	61,200.00	24,000.00
Units of Production	174,288.00	137,832.00	99,144.00	58,224.00	24,000.00
Double Declining	126,000.00	75,600.00	45,360.00	27,216.00	24,000.00
Sum of years digit	148,000.00	98,400.00	61,200.00	36,400.00	24,000.00