Concept explainers
(a)
Methods of
The three methods of depreciation are:
- Straight-line method: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.
- Units-of-activity method: In this method of depreciation, the amount of depreciation is charged based on the unit of production each year.
- Double-declining balance method (Accelerated method): In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years.
To Compute: the amount of
(a)

Explanation of Solution
Computethe amount of accumulated depreciation on each machine at December 31st, 2018.
Year | Computation | Accumulated depreciation December 31st |
Machine 1 Straight-line method | ||
2015 |
| $10,500 |
2016 |
|
$21,000
|
2017 |
|
$31,500
|
2018 |
|
$42,000
|
Machine 2 Declining-balance method | ||
2016 |
| $17,000 |
2017 |
|
$44,200
|
2018 |
|
$60,520
|
Machine 3 Units-of-activity method | ||
2016 |
| $1,600 |
2017 |
|
$10,600
|
2018 |
|
$22,600
|
Table (1)
Working notes:
Compute depreciable cost for
Determine the depreciation rate for straight line method for Machine 1.
Compute depreciable rate for declining-balance method for Machine 2.
Compute depreciation per unit for units-of-activity method for Machine 3.
Note:
Double-declining-balance ignores the salvage value for calculating depreciation.
(b)
To Calculate: the amount of depreciation expense for Machine 2 for 2016 and 2017.
(b)

Explanation of Solution
Calculate the amount of depreciation expense for Machine 2 for 2016 and 2017.
For 2016:
Cost of the Machine 2= $85,000
Depreciation Rate =40% (3)
Number of months used in 2016 = 9 months (April 1, 2016-December 31, 2016)
For 2017:
Cost of the Machine 2= $85,000
Accumulated Depreciation =$25,500 (5)
Depreciation Rate =40% (3)
Number of months used in 2017 = 12 months (January 1, 2017-December 31, 2017)
Therefore, the amount of depreciation expense for Machine 2 for 2016 is $25,500 and 2017 is $23,800.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
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