Year 1 Year 2 Year 3 Year 4 Year 5 And Jornal enrties for: Year 1 Year 2 Year 3

Question

Year 1

Year 2

Year 3

Year 4

Year 5

And Jornal enrties for:

Year 1

Year 2

Year 3

Year 4

Year 5

Part Three Freeman Ltd. purchased a piece of equipment for $400, 000 on January 1, 2013. The machine is expected to have a residual value of $40,000 at the end of its useful 11fe in 5 years, or 12,000,000 units. For each of the listed depreciation methods: prepare a five year depreciation schedule including the current year depreciation expense and the updated carrying value at the end of each year. Note: Once you have the first table complete use COPY and PASTE to save time for the other two. con Take sure you use formules for all calculations. Do not just anually enter the answer. oo e 1. Straight - line method. Annua Annual Depreciation HINT: Start with total Depre Year Star Depreciation Carrying Amount 400,000 So oo

Explanation / Answer

1 Straight line depreciation = (Cost of asset - salvage value )/ Life of the asset Depreciation expense = (400000-40000) /5 72000 Accumulated depreciation Depreciation expense Book value year 0 0 400000 Year 1 72000*12/12 72,000 72,000 3,28,000 Year 2 72000*12/12 72,000 1,44,000 2,56,000 Year 3 72000*12/12 72,000 2,16,000 1,84,000 Year 4 72000*12/12 72,000 2,88,000 1,12,000 Year 5 72000*12/12 72,000 3,60,000 40,000 2 Double declining method Depreciation rate = [(cost of asset / life of asset ) / cost of asset ] *2 Depreciation rate = [400000/5)/400000] *2 Depreciation rate = 40% Depreciation = written down value * depreciation rate Accumulated depreciation Depreciation expense Book value year 0 400000 Year 1 Depreciation = 400000*40% 120000 1,20,000 2,80,000 Year 2 Depreciation = 280000*40% 1,12,000 2,32,000 1,68,000 Year 3 Depreciation = 168000*40% 67200 2,99,200 1,00,800 Year 4 Depreciation = 100800*40% 10080 3,09,280 90,720 Year 5 Depreciation = 90720*40% 36288 3,45,568 54,432 3 Units of production method Depreciation per machine hour = (Cost of asset - salvage value )/ total machine hour Depreciation per machine hour = (400000 - 40000 )/12000000 Depreciation per item 0.03 Accumulated depreciation Depreciation expense Book value year 0 400000 Year 1 0.03*2500000 75000 75,000 3,25,000 Year 2 0.03*3750000 112500 1,87,500 2,12,500 Year 3 0.03*2300000 69000 2,56,500 1,43,500 Year 4 0.03*2350000 70500 3,27,000 73,000 Year 5 0.03*1100000 33000 3,60,000 40,000

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