Question

BBK Company bought an equipment to manufacture machine parts for Rs 5,600,000. The equipment was expected...

  1. BBK Company bought an equipment to manufacture machine parts for Rs 5,600,000. The equipment was expected to be useful for 5 years and an estimated residual value of Rs

280,000. The equipment is expected to manufacture 350,000 parts. It manufactured 105,000 parts in year 1; 84,000 in year 2; 21,000 in year 3; 112,000 in year 4 and 28,000 parts in year 5.

Required:

Compute the depreciation expense for each year under the following methods:

(a) Straight-line; (b) Written-down-value; (c) Production units

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Answer #1
(a )
cost 560000
residual value 280000
useful life 5
depriciation= (560000-280000)/5
= 56000
(b)
cost 560000
residual value 280000
useful life 5
% of depriciation= 1-(280000/560000) power 1/5
= 1-0.5 power 1/5 1/0.5
rate 9.69%
depriciation wdv
yr 1 54264 505736
yr 2 49005.8184 456730.1816
yr 3 44257.1546 412473.027
yr 4 39968.63632 372504.3907
yr 5 36095.67546 336408.7152
(c )
cost 560000
residual value 280000
useful life 5
total depriciation 280000
production units depriciation
(280000/350000)* prod unit
yr 1 105000 84000
yr 2 84000 67200
yr 3 21000 16800
yr 4 112000 89600
yr 5 28000 22400
350000 280000
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