Year |
Units |
1 |
70,000 |
2 |
67,000 |
3 |
50,000 |
4 |
73,000 |
5 |
40,000 |
Calculate depreciation expense, accumulated depreciation, and net book value of the machine for the first two years after acquisition under each of the following methods:
Part a) STRAIGHT LINE METHOD
Depreciation =(Cost - Salvage value)/ useful life
Depreciation =(950000 - 50000)/5 =$180000
Year | Opening book value | Depreciation | Accumulated Dep | Net book value |
1 | 950000 | 180000 | 180000 | 770000 |
2 | 770000 | 180000 | 360000 | 590000 |
Part 2) UNITS OF PRODUCTION
Depreciable cost = 950000 - 50000 =$900000
Year | Opening book value | units | Depreciation | Accumulated depreciation | Net Book value |
1 | 950000 | 70000 | 900000*70000/300000=210000 | 210000 | 740000 |
2 | 740000 | 67000 | 900000*67000/300000=201000 | 411000 | 539000 |
Part 3) DOUBLE DECLINING BALANCE
Dep Rate =100%/5 =20%
Double declining rate = 20*2 =40%
Year | Opening book value | Depreciation | Accumulated depreciation | Net Book Value |
1 | 950000 | 950000*40%=380000 | 380000 | 570000 |
2 | 570000 | 570000*40%=228000 | 608000 | 342000 |
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