On January 1, 2018, the Allegheny Corporation purchased machinery for $134,000.
ID: 2529184 • Letter: O
Question
On January 1, 2018, the Allegheny Corporation purchased machinery for $134,000. The estimated service life of the machinery is 10 years and the estimated residual value is $2,000. The machine is expected to produce 240,000 units during its life.
Required:
Calculate depreciation for 2018 and 2019 using each of the following methods.
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, 34,000; units produced in 2019, 29,000).
1.- Calculate depreciation for 2018 and 2019 using straight line method.
2.-Calculate depreciation for 2018 and 2019 using sum-of-the-years' digits.
3.-Calculate depreciation for 2018 and 2019 using double-declining balance.
4.-Calculate depreciation for 2018 and 2019 using one hundred fifty percent declining balance.
5.-Calculate depreciation for 2018 and 2019 using units of production (units produced in 2018, 34,000; units produced in 2019, 29,000). (Round "Depreciation per unit rate" answers to 2 decimal places.)
SHOW YOUR WORK
Explanation / Answer
1) Straight line :
Depreciation per year = (134000-2000)/10 = 13200 per year
2018 dep = 13200
2019 dep = 13200
2) Sum of year digit = 10+9+8+7+6+5+4+3+2+1 = 55
Depreciable base = 134000-2000 = 132000
2018 dep = 132000*10/55 = 24000
2019 dep = 132000*9/55 = 21600
3) Double decline rate = 100/10*2 = 20%
2018 dep = 134000*20% = 26800
2019 dep = 134000*80%*20% = 21440
4) One hundred fifty percent declining balance = 100/10*1.5 = 15%
2018 dep = 134000*15% = 20100
2019 dep = 134000*85%*15% = 17085
5) Unit of production
Dep rate = 132000/240000 = 0.55 per unit
2018 dep = 34000*.55 = 18700
2019 dep = 29000*.55 = 15950
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