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On October 1, 2018, the Allegheny Corporation purchased machinery for $299,000. The estimated service life of...

On October 1, 2018, the Allegheny Corporation purchased machinery for $299,000. The estimated service life of the machinery is 10 years and the estimated residual value is $2,000. The machine is expected to produce 540,000 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, 27,000; units produced in 2019, 42,000).

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Answer #1

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.

2018 2019
1. Straight line (299000-2000/10)*3/12 = 7425 (299000-2000/10) = 29700
2. Sum of year digit (299000-2000*10/55)*3/12 = 13500 (299000-2000*10/55*9/12)+(299000-2000*9/55*3/12) = 52650
3. Double declining balance 299000*20%*3/12 = 14950 (299000*20%*9/12+299000*80%*20%*3/12) = 56810
4. One hundred fifty percent declining balance 299000*15%*3/12 = 11213 (299000*15%*9/12+299000*85%*15%*3/12) = 43168
5. Units of production 297000/540000*27000 = 14850 297000/540000*42000 = 23100
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