Question

Sofie’s Soda Co purchased a soda drink machine on January 1^st, 2016 for $600,000. The company provided the following additional information:

1. Expected useful life is 10 years or 100,000 drinks.
2. In 2016, 6,000 drinks were sold.
3. In 2017, 16,000 drinks were sold.
4. Residual value $20,000.
5. In 2018, 12,000 bottles were sold.

The company also provided the following information using three (3) deprecation methods at the end of 2016 and 2017:

	Method A
Year	Annual Depreciation Expense	Accumulated Depreciation
2016	$          34,800	$          34,800
2017	$          92,800	$        127,600
	Method B
Year	Annual Depreciation Expense	Accumulated Depreciation
2016	$      58,000.0	$        58,000.0
2017	$      58,000.0	$      116,000.0
	Method C
Year	Annual Depreciation Expense	Accumulated Depreciation
2016	$         120,000	$        120,000
2017	$           96,000	$        216,000

Requirements:

1. Identify the depreciation method used in each instance above and show the equation and computation for each method which should tie to the figures reported in the above table.

2. Compute the depreciation expense for 2018, accumulated depreciation and net book value as at 2018 using the three methods above. (Round off answer to the nearest dollar were appropriate and show all workings).

Assuming the company adopted the double declining balance method and sold the drink machine for $60,000 on September 1st, 2018, prepare the journal

Answer 1

Method A-Units of production
Date	Cost of asset	Depreciation per miles	No. of bottles	Depreciation expenses	Accumulated Depreciation	Book value
2016	$6,00,000	$5.80	6000	$34,800	$34,800	$5,65,200
2017	$6,00,000	$5.80	16000	$92,800	$1,27,600	$4,72,400
2018	$6,00,000	$5.80	12000	$69,600	$1,97,200	$4,02,800
Method B-Straight Line
Date	Cost of asset	Depreciable cost	Useful life	Depreciation expenses	Accumulated Depreciation	Book value
2016	$6,00,000	$5,80,000	5 Years	$58,000	$58,000	$5,42,000
2017	$6,00,000	$5,80,000	5 Years	$58,000	$1,16,000	$4,84,000
2018	$6,00,000	$5,80,000	5 Years	$58,000	$1,74,000	$4,26,000
Method C-Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
2016	$6,00,000	$6,00,000	20.00%	$1,20,000	$1,20,000	$4,80,000
2017	$6,00,000	$4,80,000.00	20.00%	$96,000	$2,16,000	$3,84,000
2018	$6,00,000	$3,84,000.00	20.00%	$76,800	$2,92,800	$3,07,200
Book value as on 1st September 2018 =$384,000 - ($384,000*20%*8/12)
Book value as on 1st September 2018 =$384,000 - $51,200 =$332,800
	The journal enry will be:
		Cash	60,000
		Accumulated Depreciation	2,67,200
		Loss on sale of asset		2,72,800
		Drink machine		6,00,000