On October 1, 2016, the Allegheny Corporation purchasedmachinery for $314,000. The estimated service life of the machineryis 10 years and the estimated residual value is $6,000. The machineis expected to produce 550,000 units during its life. Required:Calculate depreciation for 2016 and 2017 using each of thefollowing methods. Partial-year depreciation is calculated based onthe number of months the asset is in service.
Straight-Line Depreciation Choose Numerator: / Choose Denominator: = Annual Depreciation / = AnnualDepreciation / = Year Annual Depreciation x Fraction of Year = Depreciation Expense 2016 x = 2017 x =
Sum-of-the-years' digits depreciation Depreciable Base x Rate per Year x Fraction of Year = Depreciation Expense 10/1/2016through 12/31/2016 x x = Total depreciation expense -2016 1/1/2017 through 9/30/2017 x x = 10/1/2017 through12/31/2017 x x = Total depreciation expense -2017
Depreciation for the Period End of Period AnnualPeriod Beginning of Period Book Value Depreciation Rate Fraction of Year Depreciation Expense Accumulated Depreciation Book Value 2016 $0 2017 $0 $0
Depreciation for the Period End of Period AnnualPeriod Beginning of Period Book Value Depreciation Rate Fraction of Year Depreciation Expense Accumulated Depreciation Book Value 2016 $0 2017 $0 $0
Select formula for Units ofProduction Depreciation: Calculate2016 depreciation expense: Depreciation per unit rate Unitsproduced in 2016 Depreciation in 2016 Calculate2017 depreciation expense: Depreciation per unit rate Unitsproduced in 2017 Depreciation in 2017
On October 1, 2016, the Allegheny Corporation purchasedmachinery for $314,000. The estimated service life of the machineryis 10 years and the estimated residual value is $6,000. The machineis expected to produce 550,000 units during its life. Required:Calculate depreciation for 2016 and 2017 using each of thefollowing methods. Partial-year depreciation is calculated based onthe number of months the asset is in service.
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Related questions
On January 1, 2016, the AlleghenyCorporation purchased machinery for $156,000. The estimated servicelife of the machinery is 10 years and the estimated residual valueis $13,000. The machine is expected to produce 220,000 units duringits life.
| Required: |
| Calculate depreciation for 2016 and 2017 using each of thefollowing methods. (Do not round intermediatecalculations.)
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| 5. | Units of production (units produced in 2016, 46,000; unitsproduced in 2017, 41,000). (Round "Depreciation per unitrate" answers to 2 decimal places.)
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2.
On March 31, 2018, Canseco Plumbing Fixtures purchased equipment for $32,000. Residual value at the end of an estimated four-year service life is expected to be $8,000. The company expects the machine to operate for 20,000 hours.
a. Calculate depreciation expense for 2018 and 2019 using straight line method.
b. Calculate depreciation expense for 2018 and 2019 using sum-of-the-yearsâ-digits method.
c. Calculate depreciation expense for 2018 and 2019 using double-declining balance method.
A.
Calculate depreciation expense for 2018 and 2019 using straight line method.
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B. Calculate depreciation expense for 2018 and 2019 using sum-of-the-yearsâ-digits method.
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C. Calculate depreciation expense for 2018 and 2019 using double-declining balance method.
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On January 22â, 2016â,TrustyDelivery Service purchased a truckat a cost of $67,000.Before placing the truck inâservice,Trustyspent $2,200
paintingâ it,$1,800 replacing âtires, and $3,700 overhauling theengine. The truck should remain in service for five years and havea residual value of $5,100.Theâ truck's annual mileage is expectedto be 20,000 miles in each of the first four years and 12,800 milesin the fifth yearlong 92,800 miles in total. In deciding whichdepreciation method toâ use,Jacob Nealyâ,the generalâ manager,requests a depreciation schedule for each of the depreciationmethodsâ (straight-line, units-of-production, andâdouble-declining-balance).
Requirement 1. Prepare a depreciation schedulefor each depreciationâ method, showing assetâ cost, depreciationâexpense, accumulatedâ depreciation, and asset book value.
Begin by preparing a depreciation schedule using theâstraight-line method.
Straight-Line Depreciation Schedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Depreciable | Depreciation | Depreciation | Accumulated | Book | |||
Date | Cost | Cost | Rate | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | / | = | ||||||
12-31-2017 | / | = | ||||||
12-31-2018 | / | = | ||||||
12-31-2019 | / | = | ||||||
12-31-2020 | / | = | ||||||
Before completing theâ units-of-production depreciationâschedule, calculate the depreciation expense per unit. â(Rounddepreciation expense per unit to two decimalâplaces.)
( | - | ) / | = | Depreciation per unit | |||
( | - | ) / | = |
Prepare a depreciation schedule using theâ units-of-productionmethod. â(Enter the depreciation per unit to two decimalâ places,$X.XX.)
Units-of-Production Depreciation Schedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Depreciation | Number of | Depreciation | Accumulated | Book | |||
Date | Cost | Per Unit | Units | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | x | = | ||||||
12-31-2017 | x | = | ||||||
12-31-2018 | x | = | ||||||
12-31-2019 | x | = | ||||||
12-31-2020 | x | = | ||||||
Prepare a depreciation schedule using theâdouble-declining-balance (DDB) method. â(Round depreciation expenseto the nearest wholeâ dollar.)
Double-Declining-Balance DepreciationSchedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Book | DDB | Depreciation | Accumulated | Book | |||
Date | Cost | Value | Rate | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | x | = | ||||||
12-31-2017 | x | = | ||||||
12-31-2018 | x | = | ||||||
12-31-2019 | x | = | ||||||
12-31-2020 | ||||||||
Requirement 2.ââ
Trusty prepares financial statements using the depreciationmethod that reports the highest net income in the early years ofasset use. Consider the first year that Trusty uses the truck.Identify the depreciation method that meets theâ company'sobjectives.The depreciation method that reports the highest netincome in the first year is the _____________________ method. Itproduces theâ¼
highest
lowest
depreciation expense and therefore the highest net income.
