Question

On January 2, 2013, Chow Corporation acquired a new machine with an estimated useful life of five years. The cost of the equipment was $60,000 with a residual value of $4,600. Chow adopts the cost model as its accounting policy in subsequently measuring its property, plant, and equipment.

  

a-1	Prepare a complete depreciation table under the straight-line method. Assume that a full year of depreciation was taken in 2013. (Omit the "$" sign in your response.)

  

Year		Depreciation Expense	Accumulated Depreciation	Book Value
2013		$	$	$
2014
2015
2016
2017

  

a-2	Prepare a complete depreciation table under the 200 percent declining-balance method. Assume that a full year of depreciation was taken in 2013. (Omit the "$" sign in your response.)

  

Year		Depreciation Expense	Accumulated Depreciation	Book Value
2013		$	$	$
2014
2015
2016
2017

  

a-3	Prepare a complete depreciation table under the 150 percent declining-balance with a switch to straight-line when it will maximize depreciation expense. Assume that a full year of depreciation was taken in 2013. (Omit the "$" sign in your response.)

  

Year		Depreciation Expense	Accumulated Depreciation	Book Value
2013		$	$	$
2014
2015
2016
2017

Answer 1

a-1	Year	Depreciation Expense	Accumulated Depreciation	Book Value
	2013	$11,080	$11,080	$48,920
	2014	$11,080	$22,160	$37,840
	2015	$11,080	$33,240	$26,760
	2016	$11,080	$44,320	$15,680
	2017	$11,080	$55,400	$4,600

Depreciation = ($60000 - $4600)/5 years = $11080

a-2	Year	Depreciation Expense	Accumulated Depreciation	Book Value
	2013	$24,000	$24,000	$36,000
	2014	$14,400	$38,400	$21,600
	2015	$8,640	$47,040	$12,960
	2016	$5,184	$52,224	$7,776
	2017*	$3,176*	$55,400	$4,600

* Switch to Straight Line Depreciation

a-3	Year	Depreciation Expense	Accumulated Depreciation	Book Value
	2013	$18,000	$18,000	$42,000
	2014	$12,600	$30,600	$29,400
	2015	$8,820	$39,420	$20,580
	2016*	$7,990*	$47,410	$12,590
	2017*	$7,990*	$55,400	$4,600

* Switch to Straight Line Depreciation = ($20580-$4600)/2 years = $7990