Answer:
$36,000 $36,000
b. $60,000 $48,000
c. $79,200, $47,520
d. $30,600, $21,600
e. $40,000 $34,000
Explanation:
A. Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
( $198,000 - $18,000 ) / 5 = $36,000
Depreciation expense each year would be $36,000
B. Sum-of-the-year digits = (remaining useful life / sum of the years ) x (Cost of asset - Salvage value)
Sum of the years = 1 +2 +3 +4 + 5 = 15
Depreciation expense in year 1 = (5/15) X ( $198,000 - $18,000 ) = $60,000
Depreciation expense in year 2 = (4/15) x ( $198,000 - $18,000 ) = $48,000
C. Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life)
2 x(1/5) = 0.4
Depreciation expense in year 1 = 0.4 x $198,000 = $79,200
Book value at the end of year 1 = $198,000 - $79,200 = $118,800
Depreciation expense in year 2 = 0.4 x $118,800 = $47,520
D. Activity method based on hours worked = (hours worked that year / total hours of the machine) x (Cost of asset - Salvage value)
Depreciation expense in year 1 = (1,700 / 10,000) x ( $198,000 - $18,000 ) = $30,600
Depreciation expense in year 1 = (1,200 / 10,000) x ( $198,000 - $18,000 ) = $21,600
E. Activity method based on units of output = (output produced that year / total output capacity of the machine) x (Cost of asset - Salvage value)
Depreciation expense in year 1 = ( 40,000 / 180,000) x ( $198,000 - $18,000 ) = $40,000
Depreciation expense in year 12= ( 34,000 / 180,000) x ( $198,000 - $18,000 ) = $34,000
