Question

Stacey Ltd purchased a new machine on 1 September 2019 at a cost of $251,200 (excluding...

Stacey Ltd purchased a new machine on 1 September 2019 at a cost of $251,200 (excluding GST).   
The entity estimated that the machine has a residual value of $28,600 (excluding GST).   
The machine is expected to be used for 42,000 working hours during its 10 year life
Assume a 31 December year-end.      

Required     

(a) Calculate the depreciation expense using the straight-line method for 2019 and 2020.
(b) Calculate the depreciation expense using the diminishing-balance method and a depreciation rate of 25% for 2019 and 2020.
(c) Calculate the depreciation expense using the units-of-production method for 2019, assuming the machine usage was 1,820 hours
(d) On 31 December 2020 the company discarded a delivery truck that was purchased on 1 January 2016 for $23,980 cash (including
GST of 10%) and was depreciated on a straight line basis with a useful life of 6 years and a residual value of $2180 (excluding GST).
What was the profit or loss on the scrapping of the truck?
Business   Accounting   
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Homework Answers

Answer #1

A) Depreciation expenses under straight line method for 2019: Cost- residual value/ no of years of life. 251200-28600/10=22260

B) Depreciation expenses under diminishing balance method for 2019: (251200-28600)*25%*4/12=18550. Here depreciation is calculated for 4 months from 01.09.2020 to 31.12.2020.

Depreciation expense under diminishing balance method for 2020: (251200-28600-18550)*25%=51012.5

C) Depreciation using units of production method (2019): (251200-28600)/42000*1820=9646

D) Cost of assets as on 01.01.2016=23980/110*100=21800.
Depreciation amount each year =21800-2180/6=3270.
Value of assets as in 31.12.2020=21800-(3270*5)=5450.

Loss in assets=5450-2180=3270.

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