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Concept Introduction:
Double Declining balance method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method, the depreciation is calculated on the beginning book value of depreciation using a depreciation rate. The depreciation rate is calculated with the help of following formula:
Requirement-a:
To Calculate:
The depreciation expense for each year using both the depreciation methods
Answer to Problem 6.23P
The depreciation expense for each year using both the depreciation methods is as follows:
| Straight Line Method: | |
| Depreciation for the year | |
| Year- 2016 | $ 11,400 |
| Year- 2017 | $ 22,800 |
| Year- 2018 | $ 22,800 |
| Year- 2019 | $ 22,800 |
| Year- 2020 | $ 22,800 |
| Year- 2021 | $ 11,400 |
| Double Declining balance Method: | |
| Depreciation for the year | |
| Year- 2016 | $ 26,400 |
| Year- 2017 | $ 42,240 |
| Year- 2018 | $ 25,344 |
| Year- 2019 | $ 15,206 |
| Year- 2020 | $ 9,124 |
| Year- 2021 | $ 2,737 |
Explanation of Solution
The depreciation expense for each year using both the depreciation methods is calculated as follows:
| Straight Line Method: | |||||
| Number of Months Asset used in the year | Annual Depreciation | Depreciation for the year | Ending Net Book value | ||
| A | B =(132000-18000)/5 | C=B*A/12 | D | 132000-D | |
| Year- 2016 | 6 | $ 22,800 | $ 11,400 | $ 11,400 | $ 120,600 |
| Year- 2017 | 12 | $ 22,800 | $ 22,800 | $ 34,200 | $ 97,800 |
| Year- 2018 | 12 | $ 22,800 | $ 22,800 | $ 57,000 | $ 75,000 |
| Year- 2019 | 12 | $ 22,800 | $ 22,800 | $ 79,800 | $ 52,200 |
| Year- 2020 | 12 | $ 22,800 | $ 22,800 | $ 102,600 | $ 29,400 |
| Year- 2021 | 6 | $ 22,800 | $ 11,400 | $ 114,000 | $ 18,000 |
| Double Declining balance Method: | |||||
| Beginning Net Book value | Number of Months Asset used in the year | Depreciation Rate | Depreciation for the year | Ending Net Book value | |
| A | B | C =2/5 | C =A*B*C/12 | D=A-C | |
| Year- 2016 | $ 132,000 | 6 | 40% | $ 26,400 | $ 105,600 |
| Year- 2017 | $ 105,600 | 12 | 40% | $ 42,240 | $ 63,360 |
| Year- 2018 | $ 63,360 | 12 | 40% | $ 25,344 | $ 38,016 |
| Year- 2019 | $ 38,016 | 12 | 40% | $ 15,206 | $ 22,810 |
| Year- 2020 | $ 22,810 | 12 | 40% | $ 9,124 | $ 13,686 |
| Year- 2021 | $ 13,686 | 6 | 40% | $ 2,737 | $ 10,949 |
Concept Introduction:
Straight line method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Double Declining balance method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method, the depreciation is calculated on the beginning book value of depreciation using a depreciation rate. The depreciation rate is calculated with the help of following formula:
Requirement-b:
To Calculate:
The depreciation expense for the year ended Dec. 31, 2016 using both the depreciation methods
Answer to Problem 6.23P
The depreciation expense for the year ended Dec. 31, 2016 using both the depreciation methods is as follows:
| Straight Line Method: | |
| Depreciation for the year | |
| Year- 2016 | $ 11,400 |
| Double Declining balance Method: | |
| Depreciation for the year | |
| Year- 2016 | $ 26,400 |
Explanation of Solution
The depreciation expense for each year using both the depreciation methods is calculated as follows:
| Straight Line Method: | |||||
| Number of Months Asset used in the year | Annual Depreciation | Depreciation for the year | Accumulated Depreciation | Ending Net Book value | |
| A | B =(132000-18000)/5 | C=B*A/12 | D | 132000-D | |
| Year- 2016 | 6 | $ 22,800 | $ 11,400 | $ 11,400 | $ 120,600 |
| Year- 2017 | 12 | $ 22,800 | $ 22,800 | $ 34,200 | $ 97,800 |
| Year- 2018 | 12 | $ 22,800 | $ 22,800 | $ 57,000 | $ 75,000 |
| Year- 2019 | 12 | $ 22,800 | $ 22,800 | $ 79,800 | $ 52,200 |
| Year- 2020 | 12 | $ 22,800 | $ 22,800 | $ 102,600 | $ 29,400 |
| Year- 2021 | 6 | $ 22,800 | $ 11,400 | $ 114,000 | $ 18,000 |
| Double Declining balance Method: | |||||
| Beginning Net Book value | Number of Months Asset used in the year | Depreciation Rate | Depreciation for the year | Ending Net Book value | |
| A | B | C =2/5 | C =A*B*C/12 | D=A-C | |
| Year- 2016 | $ 132,000 | 6 | 40% | $ 26,400 | $ 105,600 |
| Year- 2017 | $ 105,600 | 12 | 40% | $ 42,240 | $ 63,360 |
| Year- 2018 | $ 63,360 | 12 | 40% | $ 25,344 | $ 38,016 |
| Year- 2019 | $ 38,016 | 12 | 40% | $ 15,206 | $ 22,810 |
| Year- 2020 | $ 22,810 | 12 | 40% | $ 9,124 | $ 13,686 |
| Year- 2021 | $ 13,686 | 6 | 40% | $ 2,737 | $ 10,949 |
Concept Introduction:
Straight line method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Double Declining balance method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method, the depreciation is calculated on the beginning book value of depreciation using a depreciation rate. The depreciation rate is calculated with the help of following formula:
Requirement-c:
To Calculate:
The accumulated depreciation and net book value of the machine at Dec. 31, 2017 using both the methods
Answer to Problem 6.23P
The accumulated depreciation and net book value of the machine at Dec. 31, 2017 using both the methods is as follows:
| Straight Line Method: | ||
| Accumulated Depreciation | Ending Net Book value | |
| Year- 2017 | $ 34,200 | $ 97,800 |
| Double Declining balance Method: | ||
| Depreciation for the year | Ending Net Book value | |
| Year- 2017 | $ 42,240 | $ 63,360 |
Explanation of Solution
The depreciation expense and net book value for each year using both the depreciation methods is calculated as follows:
| Straight Line Method: | |||||
| Number of Months Asset used in the year | Annual Depreciation | Depreciation for the year | Accumulated Depreciation | Ending Net Book value | |
| A | B =(132000-18000)/5 | C=B*A/12 | D | 132000-D | |
| Year- 2016 | 6 | $ 22,800 | $ 11,400 | $ 11,400 | $ 120,600 |
| Year- 2017 | 12 | $ 22,800 | $ 22,800 | $ 34,200 | $ 97,800 |
| Year- 2018 | 12 | $ 22,800 | $ 22,800 | $ 57,000 | $ 75,000 |
| Year- 2019 | 12 | $ 22,800 | $ 22,800 | $ 79,800 | $ 52,200 |
| Year- 2020 | 12 | $ 22,800 | $ 22,800 | $ 102,600 | $ 29,400 |
| Year- 2021 | 6 | $ 22,800 | $ 11,400 | $ 114,000 | $ 18,000 |
| Double Declining balance Method: | |||||
| Beginning Net Book value | Number of Months Asset used in the year | Depreciation Rate | Depreciation for the year | Ending Net Book value | |
| A | B | C =2/5 | C =A*B*C/12 | D=A-C | |
| Year- 2016 | $ 132,000 | 6 | 40% | $ 26,400 | $ 105,600 |
| Year- 2017 | $ 105,600 | 12 | 40% | $ 42,240 | $ 63,360 |
| Year- 2018 | $ 63,360 | 12 | 40% | $ 25,344 | $ 38,016 |
| Year- 2019 | $ 38,016 | 12 | 40% | $ 15,206 | $ 22,810 |
| Year- 2020 | $ 22,810 | 12 | 40% | $ 9,124 | $ 13,686 |
| Year- 2021 | $ 13,686 | 6 | 40% | $ 2,737 | $ 10,949 |
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Chapter 6 Solutions
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