On October 1, 2018, the Allegheny Corporation purchased
machinery for $123,000. The estimated service life of the machinery
is 10 years and the estimated residual value is $2,000. The machine
is expected to produce 220,000 units during its life.
Required:
Calculate depreciation for 2018 and 2019 using each of the
following methods. Partial-year depreciation is calculated based on
the number of months the asset is in service.
1. Straight line.
2. Sum-of-the-years’-digits.
3. Double-declining balance.
4. One hundred fifty percent declining
balance.
5. Units of production (units produced in 2018,
11,000; units produced in 2019, 26,000).
1.straight line
Depreciation per year = (cost - residual value)/ life of asset
= (123000 - 2000)/10 = 12100
Depreciation for 2018 = (12100*3)/12 =3025
Depreciation for 2019 = 12100
2.sum of year digits method
(n(n+1)) = (10(10+1))/2 = 55
Depreciation for 2018 = (123000-2000) * 10/55 *3/12 = 5500
Depreciation for 2019 = (123000-2000)* 9.75/55 = 21450
3.double declining
Rate of depreciation = (100/10)*2= 20%
Depreciation for 2018= (123000*20%*3)/12 = 6150
Depreciation for 2019= (123000-6150)*20% = 23370
4.150 percent declining balance
Depreciation for 2018 = (123000*1.5*10%*3)/12 = 4613
Depreciation for 2019 = (123000-4613)*1.5*10% = 17758
5.units of production
Depreciation for 2018 = (123000-2000)*11000/220000=6050
Depreciation for 2019= (123000-2000)*26000/220000=14300
Thanks......
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