Depreciation : Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied. Double Declining Balance Method: It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period. Straight Line Depreciation: Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset. Units of Production Depreciation Method: This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives. The amount of depreciation.

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Answer 1

Question

Chapter 8, Problem 2PSB

To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Double Declining Balance Method:

It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

Units of Production Depreciation Method:

This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives.

The amount of depreciation.

Expert Solution & Answer

Explanation of Solution

Given,
Cost of machine is $324,000.
Salvage value is $30,000.

Formula to calculate Depreciable cost:

$Depreciable cost=Cost of machine−Salvage value$

Substitute $257,000 as cost of machine and $20,000 as salvage value,

$Depreciable cost=$324,000−$30,000 =$294,000$

Total depreciable cost is $294,000.

Computation of depreciation amount:

Year	Straight line ($)	Units of production ($)	Double Declining Balance ($)
1	58,800	71,120	128,750
2	58,800	64,080	64,375
3	58,800	63,400	32,188
4	58,800	68,720	12,187
5	58,800	26,680	11,990
Total	294,000	294,000	294,000

Working Notes:

Straight line method

Calculate Depreciation:

$Depreciation= ( Cost of the asset−Residual value ) Useful life = $324,000−$30,000 5 = $294,000 5 =$58,800$

Depreciation that will be charged in the 4 years with respect to straight line method is $58,800.

Units of production method

Year 1

Calculate depreciation with respect to units of production:

$Depreciation per unit= ( Cost of the asset−Salvage value ) Useful life in units = $324,000−$30,000 $1,470,000 units = $294,000 1,470,000 =0.2 per unit$

Depreciation per unit is 0.2.

Computation of depreciation,

$Depreciation=Total units produced in 1st year×Depreciation per unit =$355,600×0.2 =$71,120$

Depreciation that will be charged in the first year is $71,120.

Year 2

Given,
Units produced are $320,400.

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 2nd year×Depreciation per unit =$320,400×0.2 =$64,080$

Depreciation that will be charged in the second year is $64,080.

Year 3

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 3rd year×Depreciation per unit =$317,000×0.2 =$63,400$

Depreciation that will be charged in the third year is $63,400.

Year 4

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$343,600×0.2 =$68,720$

Depreciation charged in the 4^t^h year is $68,720.

Year 5

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$138,500×0.2 =$27,700$

But the depreciation will be charged $26,680 only as depreciation can’t be charged on the salvage value of the asset.

Double Declining Balance method

Computation of Depreciation rate:

$Double declining depreciation rate= 100% Useful years ×2 = 100% 5 ×2 40%$

Double declining depreciation rate is 40%.

Year 1

Computation of depreciation in the first year:

$Depreciation=Cost of the machine×Depreciation rate =$324,000×40% =$129,600.$

Depreciation that will be charged in the first year is $129,600.

Year 2

Computation of book value in year 2:

$Book value=Cost of the asset−Depreciation =$324,000−$129,600 =$194,400$

Book value at the beginning of the second year is $194,400.

Computation of depreciation in the second year:

$Depreciation=Cost of the machine×Depreciation rate =$194,400×40% =$77,760.$

Depreciation that will be charged in the second year is $77,760.

Year 3

Book value of the asset in the year 2 is $194,400.

Computation of book value in year 3:

$Book value=Cost of the asset−Depreciation =$194,400−$77,760 =$116,640$

Book value at the beginning of the third year is $116,640.

Computation of depreciation in the third year:

$Depreciation=Cost of the machine×Depreciation rate =$116,640×40% =$46,656$

Depreciation that will be charged in the third year is $46,656.

Year 4

Book value of the asset in the year 3 is $116,640.

Computation of book value in year 4:

$Book value=Cost of the asset−Depreciation =$116,640−$46,656 =$69,984$

Computation of depreciation in the 4^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$69,984×40% =$27,994$

Depreciation that will be charged in the 5^t^h year is $27,994.

Year 5

Book value of the asset in the year 4 is $69,984.

Computation of book value in year 5:

$Book value=Cost of the asset−Depreciation =$69,984−$27,994 =$41,990$

Computation of depreciation in the 5^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$41,990×40% =$16,796$

But the depreciation charged will only be 11,990 as the depreciation can’t be charged from the salvage value of the asset.

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Answer 2

Question

Chapter 8, Problem 2PSB

To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Double Declining Balance Method:

It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

Units of Production Depreciation Method:

This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives.

The amount of depreciation.

Expert Solution & Answer

Explanation of Solution

Given,
Cost of machine is $324,000.
Salvage value is $30,000.

Formula to calculate Depreciable cost:

$Depreciable cost=Cost of machine−Salvage value$

Substitute $257,000 as cost of machine and $20,000 as salvage value,

$Depreciable cost=$324,000−$30,000 =$294,000$

Total depreciable cost is $294,000.

Computation of depreciation amount:

Year	Straight line ($)	Units of production ($)	Double Declining Balance ($)
1	58,800	71,120	128,750
2	58,800	64,080	64,375
3	58,800	63,400	32,188
4	58,800	68,720	12,187
5	58,800	26,680	11,990
Total	294,000	294,000	294,000

Working Notes:

Straight line method

Calculate Depreciation:

$Depreciation= ( Cost of the asset−Residual value ) Useful life = $324,000−$30,000 5 = $294,000 5 =$58,800$

Depreciation that will be charged in the 4 years with respect to straight line method is $58,800.

Units of production method

Year 1

Calculate depreciation with respect to units of production:

$Depreciation per unit= ( Cost of the asset−Salvage value ) Useful life in units = $324,000−$30,000 $1,470,000 units = $294,000 1,470,000 =0.2 per unit$

Depreciation per unit is 0.2.

Computation of depreciation,

$Depreciation=Total units produced in 1st year×Depreciation per unit =$355,600×0.2 =$71,120$

Depreciation that will be charged in the first year is $71,120.

Year 2

Given,
Units produced are $320,400.

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 2nd year×Depreciation per unit =$320,400×0.2 =$64,080$

Depreciation that will be charged in the second year is $64,080.

Year 3

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 3rd year×Depreciation per unit =$317,000×0.2 =$63,400$

Depreciation that will be charged in the third year is $63,400.

Year 4

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$343,600×0.2 =$68,720$

Depreciation charged in the 4^t^h year is $68,720.

Year 5

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$138,500×0.2 =$27,700$

But the depreciation will be charged $26,680 only as depreciation can’t be charged on the salvage value of the asset.

Double Declining Balance method

Computation of Depreciation rate:

$Double declining depreciation rate= 100% Useful years ×2 = 100% 5 ×2 40%$

Double declining depreciation rate is 40%.

Year 1

Computation of depreciation in the first year:

$Depreciation=Cost of the machine×Depreciation rate =$324,000×40% =$129,600.$

Depreciation that will be charged in the first year is $129,600.

Year 2

Computation of book value in year 2:

$Book value=Cost of the asset−Depreciation =$324,000−$129,600 =$194,400$

Book value at the beginning of the second year is $194,400.

Computation of depreciation in the second year:

$Depreciation=Cost of the machine×Depreciation rate =$194,400×40% =$77,760.$

Depreciation that will be charged in the second year is $77,760.

Year 3

Book value of the asset in the year 2 is $194,400.

Computation of book value in year 3:

$Book value=Cost of the asset−Depreciation =$194,400−$77,760 =$116,640$

Book value at the beginning of the third year is $116,640.

Computation of depreciation in the third year:

$Depreciation=Cost of the machine×Depreciation rate =$116,640×40% =$46,656$

Depreciation that will be charged in the third year is $46,656.

Year 4

Book value of the asset in the year 3 is $116,640.

Computation of book value in year 4:

$Book value=Cost of the asset−Depreciation =$116,640−$46,656 =$69,984$

Computation of depreciation in the 4^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$69,984×40% =$27,994$

Depreciation that will be charged in the 5^t^h year is $27,994.

Year 5

Book value of the asset in the year 4 is $69,984.

Computation of book value in year 5:

$Book value=Cost of the asset−Depreciation =$69,984−$27,994 =$41,990$

Computation of depreciation in the 5^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$41,990×40% =$16,796$

But the depreciation charged will only be 11,990 as the depreciation can’t be charged from the salvage value of the asset.

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Answer 3

Question

Chapter 8, Problem 2PSB

To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Double Declining Balance Method:

It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

Units of Production Depreciation Method:

This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives.

The amount of depreciation.

Expert Solution & Answer

Explanation of Solution

Given,
Cost of machine is $324,000.
Salvage value is $30,000.

Formula to calculate Depreciable cost:

$Depreciable cost=Cost of machine−Salvage value$

Substitute $257,000 as cost of machine and $20,000 as salvage value,

$Depreciable cost=$324,000−$30,000 =$294,000$

Total depreciable cost is $294,000.

Computation of depreciation amount:

Year	Straight line ($)	Units of production ($)	Double Declining Balance ($)
1	58,800	71,120	128,750
2	58,800	64,080	64,375
3	58,800	63,400	32,188
4	58,800	68,720	12,187
5	58,800	26,680	11,990
Total	294,000	294,000	294,000

Working Notes:

Straight line method

Calculate Depreciation:

$Depreciation= ( Cost of the asset−Residual value ) Useful life = $324,000−$30,000 5 = $294,000 5 =$58,800$

Depreciation that will be charged in the 4 years with respect to straight line method is $58,800.

Units of production method

Year 1

Calculate depreciation with respect to units of production:

$Depreciation per unit= ( Cost of the asset−Salvage value ) Useful life in units = $324,000−$30,000 $1,470,000 units = $294,000 1,470,000 =0.2 per unit$

Depreciation per unit is 0.2.

Computation of depreciation,

$Depreciation=Total units produced in 1st year×Depreciation per unit =$355,600×0.2 =$71,120$

Depreciation that will be charged in the first year is $71,120.

Year 2

Given,
Units produced are $320,400.

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 2nd year×Depreciation per unit =$320,400×0.2 =$64,080$

Depreciation that will be charged in the second year is $64,080.

Year 3

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 3rd year×Depreciation per unit =$317,000×0.2 =$63,400$

Depreciation that will be charged in the third year is $63,400.

Year 4

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$343,600×0.2 =$68,720$

Depreciation charged in the 4^t^h year is $68,720.

Year 5

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$138,500×0.2 =$27,700$

But the depreciation will be charged $26,680 only as depreciation can’t be charged on the salvage value of the asset.

Double Declining Balance method

Computation of Depreciation rate:

$Double declining depreciation rate= 100% Useful years ×2 = 100% 5 ×2 40%$

Double declining depreciation rate is 40%.

Year 1

Computation of depreciation in the first year:

$Depreciation=Cost of the machine×Depreciation rate =$324,000×40% =$129,600.$

Depreciation that will be charged in the first year is $129,600.

Year 2

Computation of book value in year 2:

$Book value=Cost of the asset−Depreciation =$324,000−$129,600 =$194,400$

Book value at the beginning of the second year is $194,400.

Computation of depreciation in the second year:

$Depreciation=Cost of the machine×Depreciation rate =$194,400×40% =$77,760.$

Depreciation that will be charged in the second year is $77,760.

Year 3

Book value of the asset in the year 2 is $194,400.

Computation of book value in year 3:

$Book value=Cost of the asset−Depreciation =$194,400−$77,760 =$116,640$

Book value at the beginning of the third year is $116,640.

Computation of depreciation in the third year:

$Depreciation=Cost of the machine×Depreciation rate =$116,640×40% =$46,656$

Depreciation that will be charged in the third year is $46,656.

Year 4

Book value of the asset in the year 3 is $116,640.

Computation of book value in year 4:

$Book value=Cost of the asset−Depreciation =$116,640−$46,656 =$69,984$

Computation of depreciation in the 4^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$69,984×40% =$27,994$

Depreciation that will be charged in the 5^t^h year is $27,994.

Year 5

Book value of the asset in the year 4 is $69,984.

Computation of book value in year 5:

$Book value=Cost of the asset−Depreciation =$69,984−$27,994 =$41,990$

Computation of depreciation in the 5^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$41,990×40% =$16,796$

But the depreciation charged will only be 11,990 as the depreciation can’t be charged from the salvage value of the asset.

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Answer 4

Question

Chapter 8, Problem 2PSB

To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Double Declining Balance Method:

It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

Units of Production Depreciation Method:

This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives.

The amount of depreciation.

Expert Solution & Answer

Explanation of Solution

Given,
Cost of machine is $324,000.
Salvage value is $30,000.

Formula to calculate Depreciable cost:

$Depreciable cost=Cost of machine−Salvage value$

Substitute $257,000 as cost of machine and $20,000 as salvage value,

$Depreciable cost=$324,000−$30,000 =$294,000$

Total depreciable cost is $294,000.

Computation of depreciation amount:

Year	Straight line ($)	Units of production ($)	Double Declining Balance ($)
1	58,800	71,120	128,750
2	58,800	64,080	64,375
3	58,800	63,400	32,188
4	58,800	68,720	12,187
5	58,800	26,680	11,990
Total	294,000	294,000	294,000

Working Notes:

Straight line method

Calculate Depreciation:

$Depreciation= ( Cost of the asset−Residual value ) Useful life = $324,000−$30,000 5 = $294,000 5 =$58,800$

Depreciation that will be charged in the 4 years with respect to straight line method is $58,800.

Units of production method

Year 1

Calculate depreciation with respect to units of production:

$Depreciation per unit= ( Cost of the asset−Salvage value ) Useful life in units = $324,000−$30,000 $1,470,000 units = $294,000 1,470,000 =0.2 per unit$

Depreciation per unit is 0.2.

Computation of depreciation,

$Depreciation=Total units produced in 1st year×Depreciation per unit =$355,600×0.2 =$71,120$

Depreciation that will be charged in the first year is $71,120.

Year 2

Given,
Units produced are $320,400.

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 2nd year×Depreciation per unit =$320,400×0.2 =$64,080$

Depreciation that will be charged in the second year is $64,080.

Year 3

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 3rd year×Depreciation per unit =$317,000×0.2 =$63,400$

Depreciation that will be charged in the third year is $63,400.

Year 4

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$343,600×0.2 =$68,720$

Depreciation charged in the 4^t^h year is $68,720.

Year 5

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$138,500×0.2 =$27,700$

But the depreciation will be charged $26,680 only as depreciation can’t be charged on the salvage value of the asset.

Double Declining Balance method

Computation of Depreciation rate:

$Double declining depreciation rate= 100% Useful years ×2 = 100% 5 ×2 40%$

Double declining depreciation rate is 40%.

Year 1

Computation of depreciation in the first year:

$Depreciation=Cost of the machine×Depreciation rate =$324,000×40% =$129,600.$

Depreciation that will be charged in the first year is $129,600.

Year 2

Computation of book value in year 2:

$Book value=Cost of the asset−Depreciation =$324,000−$129,600 =$194,400$

Book value at the beginning of the second year is $194,400.

Computation of depreciation in the second year:

$Depreciation=Cost of the machine×Depreciation rate =$194,400×40% =$77,760.$

Depreciation that will be charged in the second year is $77,760.

Year 3

Book value of the asset in the year 2 is $194,400.

Computation of book value in year 3:

$Book value=Cost of the asset−Depreciation =$194,400−$77,760 =$116,640$

Book value at the beginning of the third year is $116,640.

Computation of depreciation in the third year:

$Depreciation=Cost of the machine×Depreciation rate =$116,640×40% =$46,656$

Depreciation that will be charged in the third year is $46,656.

Year 4

Book value of the asset in the year 3 is $116,640.

Computation of book value in year 4:

$Book value=Cost of the asset−Depreciation =$116,640−$46,656 =$69,984$

Computation of depreciation in the 4^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$69,984×40% =$27,994$

Depreciation that will be charged in the 5^t^h year is $27,994.

Year 5

Book value of the asset in the year 4 is $69,984.

Computation of book value in year 5:

$Book value=Cost of the asset−Depreciation =$69,984−$27,994 =$41,990$

Computation of depreciation in the 5^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$41,990×40% =$16,796$

But the depreciation charged will only be 11,990 as the depreciation can’t be charged from the salvage value of the asset.

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Answer 5

Chapter 8, Problem 2PSB

To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Double Declining Balance Method:

It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

Units of Production Depreciation Method:

This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives.

The amount of depreciation.

Expert Solution & Answer

Explanation of Solution

Given,
Cost of machine is $324,000.
Salvage value is $30,000.

Formula to calculate Depreciable cost:

$Depreciable cost=Cost of machine−Salvage value$

Substitute $257,000 as cost of machine and $20,000 as salvage value,

$Depreciable cost=$324,000−$30,000 =$294,000$

Total depreciable cost is $294,000.

Computation of depreciation amount:

Year	Straight line ($)	Units of production ($)	Double Declining Balance ($)
1	58,800	71,120	128,750
2	58,800	64,080	64,375
3	58,800	63,400	32,188
4	58,800	68,720	12,187
5	58,800	26,680	11,990
Total	294,000	294,000	294,000

Working Notes:

Straight line method

Calculate Depreciation:

$Depreciation= ( Cost of the asset−Residual value ) Useful life = $324,000−$30,000 5 = $294,000 5 =$58,800$

Depreciation that will be charged in the 4 years with respect to straight line method is $58,800.

Units of production method

Year 1

Calculate depreciation with respect to units of production:

$Depreciation per unit= ( Cost of the asset−Salvage value ) Useful life in units = $324,000−$30,000 $1,470,000 units = $294,000 1,470,000 =0.2 per unit$

Depreciation per unit is 0.2.

Computation of depreciation,

$Depreciation=Total units produced in 1st year×Depreciation per unit =$355,600×0.2 =$71,120$

Depreciation that will be charged in the first year is $71,120.

Year 2

Given,
Units produced are $320,400.

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 2nd year×Depreciation per unit =$320,400×0.2 =$64,080$

Depreciation that will be charged in the second year is $64,080.

Year 3

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 3rd year×Depreciation per unit =$317,000×0.2 =$63,400$

Depreciation that will be charged in the third year is $63,400.

Year 4

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$343,600×0.2 =$68,720$

Depreciation charged in the 4^t^h year is $68,720.

Year 5

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$138,500×0.2 =$27,700$

But the depreciation will be charged $26,680 only as depreciation can’t be charged on the salvage value of the asset.

Double Declining Balance method

Computation of Depreciation rate:

$Double declining depreciation rate= 100% Useful years ×2 = 100% 5 ×2 40%$

Double declining depreciation rate is 40%.

Year 1

Computation of depreciation in the first year:

$Depreciation=Cost of the machine×Depreciation rate =$324,000×40% =$129,600.$

Depreciation that will be charged in the first year is $129,600.

Year 2

Computation of book value in year 2:

$Book value=Cost of the asset−Depreciation =$324,000−$129,600 =$194,400$

Book value at the beginning of the second year is $194,400.

Computation of depreciation in the second year:

$Depreciation=Cost of the machine×Depreciation rate =$194,400×40% =$77,760.$

Depreciation that will be charged in the second year is $77,760.

Year 3

Book value of the asset in the year 2 is $194,400.

Computation of book value in year 3:

$Book value=Cost of the asset−Depreciation =$194,400−$77,760 =$116,640$

Book value at the beginning of the third year is $116,640.

Computation of depreciation in the third year:

$Depreciation=Cost of the machine×Depreciation rate =$116,640×40% =$46,656$

Depreciation that will be charged in the third year is $46,656.

Year 4

Book value of the asset in the year 3 is $116,640.

Computation of book value in year 4:

$Book value=Cost of the asset−Depreciation =$116,640−$46,656 =$69,984$

Computation of depreciation in the 4^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$69,984×40% =$27,994$

Depreciation that will be charged in the 5^t^h year is $27,994.

Year 5

Book value of the asset in the year 4 is $69,984.

Computation of book value in year 5:

$Book value=Cost of the asset−Depreciation =$69,984−$27,994 =$41,990$

Computation of depreciation in the 5^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$41,990×40% =$16,796$

But the depreciation charged will only be 11,990 as the depreciation can’t be charged from the salvage value of the asset.

Answer 6

Chapter 8, Problem 2PSB

To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Double Declining Balance Method:

It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

Units of Production Depreciation Method:

This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives.

The amount of depreciation.

Expert Solution & Answer

Explanation of Solution

Given,
Cost of machine is $324,000.
Salvage value is $30,000.

Formula to calculate Depreciable cost:

$Depreciable cost=Cost of machine−Salvage value$

Substitute $257,000 as cost of machine and $20,000 as salvage value,

$Depreciable cost=$324,000−$30,000 =$294,000$

Total depreciable cost is $294,000.

Computation of depreciation amount:

Year	Straight line ($)	Units of production ($)	Double Declining Balance ($)
1	58,800	71,120	128,750
2	58,800	64,080	64,375
3	58,800	63,400	32,188
4	58,800	68,720	12,187
5	58,800	26,680	11,990
Total	294,000	294,000	294,000

Working Notes:

Straight line method

Calculate Depreciation:

$Depreciation= ( Cost of the asset−Residual value ) Useful life = $324,000−$30,000 5 = $294,000 5 =$58,800$

Depreciation that will be charged in the 4 years with respect to straight line method is $58,800.

Units of production method

Year 1

Calculate depreciation with respect to units of production:

$Depreciation per unit= ( Cost of the asset−Salvage value ) Useful life in units = $324,000−$30,000 $1,470,000 units = $294,000 1,470,000 =0.2 per unit$

Depreciation per unit is 0.2.

Computation of depreciation,

$Depreciation=Total units produced in 1st year×Depreciation per unit =$355,600×0.2 =$71,120$

Depreciation that will be charged in the first year is $71,120.

Year 2

Given,
Units produced are $320,400.

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 2nd year×Depreciation per unit =$320,400×0.2 =$64,080$

Depreciation that will be charged in the second year is $64,080.

Year 3

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 3rd year×Depreciation per unit =$317,000×0.2 =$63,400$

Depreciation that will be charged in the third year is $63,400.

Year 4

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$343,600×0.2 =$68,720$

Depreciation charged in the 4^t^h year is $68,720.

Year 5

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$138,500×0.2 =$27,700$

But the depreciation will be charged $26,680 only as depreciation can’t be charged on the salvage value of the asset.

Double Declining Balance method

Computation of Depreciation rate:

$Double declining depreciation rate= 100% Useful years ×2 = 100% 5 ×2 40%$

Double declining depreciation rate is 40%.

Year 1

Computation of depreciation in the first year:

$Depreciation=Cost of the machine×Depreciation rate =$324,000×40% =$129,600.$

Depreciation that will be charged in the first year is $129,600.

Year 2

Computation of book value in year 2:

$Book value=Cost of the asset−Depreciation =$324,000−$129,600 =$194,400$

Book value at the beginning of the second year is $194,400.

Computation of depreciation in the second year:

$Depreciation=Cost of the machine×Depreciation rate =$194,400×40% =$77,760.$

Depreciation that will be charged in the second year is $77,760.

Year 3

Book value of the asset in the year 2 is $194,400.

Computation of book value in year 3:

$Book value=Cost of the asset−Depreciation =$194,400−$77,760 =$116,640$

Book value at the beginning of the third year is $116,640.

Computation of depreciation in the third year:

$Depreciation=Cost of the machine×Depreciation rate =$116,640×40% =$46,656$

Depreciation that will be charged in the third year is $46,656.

Year 4

Book value of the asset in the year 3 is $116,640.

Computation of book value in year 4:

$Book value=Cost of the asset−Depreciation =$116,640−$46,656 =$69,984$

Computation of depreciation in the 4^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$69,984×40% =$27,994$

Depreciation that will be charged in the 5^t^h year is $27,994.

Year 5

Book value of the asset in the year 4 is $69,984.

Computation of book value in year 5:

$Book value=Cost of the asset−Depreciation =$69,984−$27,994 =$41,990$

Computation of depreciation in the 5^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$41,990×40% =$16,796$

But the depreciation charged will only be 11,990 as the depreciation can’t be charged from the salvage value of the asset.

Answer 7

Chapter 8, Problem 2PSB

To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Double Declining Balance Method:

It is a method of depreciation in which the rate of depreciation is double the rate of straight line method of depreciation. The amount of depreciation applied to the asset declines every period because book value declines every period.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

Units of Production Depreciation Method:

This is a method of depreciation where the depreciation is not applied as straight line and is calculated with respect to the units that a particular asset produces gives.

The amount of depreciation.

Answer 8

Expert Solution & Answer

Explanation of Solution

Given,
Cost of machine is $324,000.
Salvage value is $30,000.

Formula to calculate Depreciable cost:

$Depreciable cost=Cost of machine−Salvage value$

Substitute $257,000 as cost of machine and $20,000 as salvage value,

$Depreciable cost=$324,000−$30,000 =$294,000$

Total depreciable cost is $294,000.

Computation of depreciation amount:

Year	Straight line ($)	Units of production ($)	Double Declining Balance ($)
1	58,800	71,120	128,750
2	58,800	64,080	64,375
3	58,800	63,400	32,188
4	58,800	68,720	12,187
5	58,800	26,680	11,990
Total	294,000	294,000	294,000

Working Notes:

Straight line method

Calculate Depreciation:

$Depreciation= ( Cost of the asset−Residual value ) Useful life = $324,000−$30,000 5 = $294,000 5 =$58,800$

Depreciation that will be charged in the 4 years with respect to straight line method is $58,800.

Units of production method

Year 1

Calculate depreciation with respect to units of production:

$Depreciation per unit= ( Cost of the asset−Salvage value ) Useful life in units = $324,000−$30,000 $1,470,000 units = $294,000 1,470,000 =0.2 per unit$

Depreciation per unit is 0.2.

Computation of depreciation,

$Depreciation=Total units produced in 1st year×Depreciation per unit =$355,600×0.2 =$71,120$

Depreciation that will be charged in the first year is $71,120.

Year 2

Given,
Units produced are $320,400.

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 2nd year×Depreciation per unit =$320,400×0.2 =$64,080$

Depreciation that will be charged in the second year is $64,080.

Year 3

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 3rd year×Depreciation per unit =$317,000×0.2 =$63,400$

Depreciation that will be charged in the third year is $63,400.

Year 4

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$343,600×0.2 =$68,720$

Depreciation charged in the 4^t^h year is $68,720.

Year 5

Depreciation per unit is 0.2 per unit.

Computation of Depreciation:

$Depreciation=Total units produced in 4th year×Depreciation per unit =$138,500×0.2 =$27,700$

But the depreciation will be charged $26,680 only as depreciation can’t be charged on the salvage value of the asset.

Double Declining Balance method

Computation of Depreciation rate:

$Double declining depreciation rate= 100% Useful years ×2 = 100% 5 ×2 40%$

Double declining depreciation rate is 40%.

Year 1

Computation of depreciation in the first year:

$Depreciation=Cost of the machine×Depreciation rate =$324,000×40% =$129,600.$

Depreciation that will be charged in the first year is $129,600.

Year 2

Computation of book value in year 2:

$Book value=Cost of the asset−Depreciation =$324,000−$129,600 =$194,400$

Book value at the beginning of the second year is $194,400.

Computation of depreciation in the second year:

$Depreciation=Cost of the machine×Depreciation rate =$194,400×40% =$77,760.$

Depreciation that will be charged in the second year is $77,760.

Year 3

Book value of the asset in the year 2 is $194,400.

Computation of book value in year 3:

$Book value=Cost of the asset−Depreciation =$194,400−$77,760 =$116,640$

Book value at the beginning of the third year is $116,640.

Computation of depreciation in the third year:

$Depreciation=Cost of the machine×Depreciation rate =$116,640×40% =$46,656$

Depreciation that will be charged in the third year is $46,656.

Year 4

Book value of the asset in the year 3 is $116,640.

Computation of book value in year 4:

$Book value=Cost of the asset−Depreciation =$116,640−$46,656 =$69,984$

Computation of depreciation in the 4^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$69,984×40% =$27,994$

Depreciation that will be charged in the 5^t^h year is $27,994.

Year 5

Book value of the asset in the year 4 is $69,984.

Computation of book value in year 5:

$Book value=Cost of the asset−Depreciation =$69,984−$27,994 =$41,990$

Computation of depreciation in the 5^t^h year:

$Depreciation=Cost of the machine×Depreciation rate =$41,990×40% =$16,796$

But the depreciation charged will only be 11,990 as the depreciation can’t be charged from the salvage value of the asset.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 8 - Prob. 1MCQ Ch. 8 - Prob. 2MCQ Ch. 8 - A company purchased machinery for $ 10,800,000 on...Ch. 8 - Prob. 4MCQ Ch. 8 - Prob. 5MCQ Ch. 8 - Prob. 1DQ Ch. 8 - Prob. 2DQ Ch. 8 - Prob. 3DQ Ch. 8 - Prob. 4DQ Ch. 8 - Prob. 5DQ

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