Accounting: What the Numbers Mean
Accounting: What the Numbers Mean
12th Edition
ISBN: 9781308841380
Author: David H. Marshall, Wayne W. McManus, Daniel F. Viele
Publisher: McGraw Hill
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Chapter 6, Problem 6.23P
To determine

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:

  Annual Straight line depreciation = (Cost- Salvage Value)Estimated life in years 

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:

  Double declining depreciation rate =  2Expected life in years

Requirement-a:

To Calculate:

The depreciation expense for each year using both the depreciation methods

Expert Solution
Check Mark

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 yearAnnual DepreciationDepreciation for the yearAccumulated DepreciationEnding 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 valueNumber of Months Asset used in the yearDepreciation RateDepreciation for the yearEnding 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
To determine

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:

  Annual Straight line depreciation = (Cost- Salvage Value)Estimated life in years 

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:

  Double declining depreciation rate =  2Expected life in years

Requirement-b:

To Calculate:

The depreciation expense for the year ended Dec. 31, 2016 using both the depreciation methods

Expert Solution
Check Mark

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 yearAnnual DepreciationDepreciation for the yearAccumulated DepreciationEnding 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 valueNumber of Months Asset used in the yearDepreciation RateDepreciation for the yearEnding 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
To determine

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:

  Annual Straight line depreciation = (Cost- Salvage Value)Estimated life in years 

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:

  Double declining depreciation rate =  2Expected life in years

Requirement-c:

To Calculate:

The accumulated depreciation and net book value of the machine at Dec. 31, 2017 using both the methods

Expert Solution
Check Mark

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 DepreciationEnding Net Book value
    Year- 2017
    $ 34,200
    $ 97,800
    Double Declining balance Method:
    Depreciation for the yearEnding 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 yearAnnual DepreciationDepreciation for the yearAccumulated DepreciationEnding 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 valueNumber of Months Asset used in the yearDepreciation RateDepreciation for the yearEnding 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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