Question

Q) The Rx Drug company has just purchased a capsulating machine for $76,000.The plant engineer estimates the machine has a useful life of 5 years ans no salvage value. Find the:

1) For straight line depreciation find the book value at the second year.

2) For straight line depreciation find the depreciation in third year.

3) For straight line depreciation find the sum of depreciation at the fourth year.

4)for the double depreciation find balance the book value at year five.

5)for the double depreciation find balance the depreciation at year five.

6)for the double depreciation balance find the sum of depreciation at year five.

7)for the sum of year digit the book value fourth year.

8)for the sum of year digit the depreciation at the fifth year .

9)for the sum of year digit the sum of depreciation at the third year.

10)the book value at year five is the best for:

a.no one of them.

b.sum of year digit.

c.Double depreciation balance.

d.straight line depreciation.

Answer 1

ANS

Straight line method of depriciation is the method in which each year the asset is depriciated is by same amount of depriciation. Since the machiene has no salvage value then the rate of depriciation at eachyear will be 20% .

year	Book Value	Depriciation @ 20%	Depriciated book value
1	76000	15200	60800
2	60800	15200	45600
3	45600	15200	30400
4	30400	15200	15200
5	15200	15200	0

1. The book value at the second year = 60800

2.  The depreciation in third year = 15200

3.  The sum of depreciation at the fourth year = 60800

4. With double depreciation method

year	Book Value	Depriciation @ 20%	Depriciated book value
1	76000	15200	60800
2	60800	12160	48640
3	48640	9728	38912
4	38912	7782.4	31129.6
5	31129.6	6225.92	24903.68

4. Balance the book value at year five = 24903.68

5 .Balance the depreciation at year five=6225.92