Question

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On October 1, 2021, the Allegheny Corporation purchased equipment for $332,000. The estimated service life of the equipment is 10 years and the estimated residual value is $2,000. The equipment is expected to produce 550,000 units during its life.

Required:
Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.

Answer 1

Depreciation as per (SLM) Straight Line Method:- Cost of Equipment = $ 3,32,000

Life of Equipment = 10 years

Salvage Value = $ 2,000

Dep =[ (Cost of Assets - Salvage Value) ÷ Life ]

= [ ($ 3,32,000 - $ 2,000) ÷ 10 Years ]

Depreciation = $ 33,000 per annum

Particulars   2021    2022

Depreciation $ 8,250 $ 33,000

[($33,000×3)÷12] [($33,000×12)÷12]

Note:-Assume year is taken Calender Year Basis.

( January to December)

So, in 2021 equipment used only 3 months from (Oct,2021 to Dec,2021) & used 12 months (full year) in 2022. Then depreciation calculated above accrording to that uses.