Answer:
Heavy Construction Firm
a. Sum-of-years-digits' Depreciation Schedule
Year Cost Depreciation Accumulated Net Book Value
Expense Depreciation
Year 1 $600,000 $120,000 $120,000 $480,000
Year 2 $600,000 $105,000 $225,000 $375,000
Year 3 $600,000 $90,000 $315,000 $285,000
Year 4 $600,000 $75,000 $390,000 $210,000
Year 5 $600,000 $60,000 $450,000 $150,000
Year 6 $600,000 $45,000 $495,000 $105,000
Year 7 $600,000 $30,000 $525,000 $75,000
Year 8 $600,000 $15,000 $540,000 $60,000
b. The Unit-of-Production Depreciation Schedule
Year Cost Depreciation Accumulated Net Book Value
Expense Depreciation
Year 1 $600,000 $150,000 $150,000 $450,000
Year 2 $600,000 $100,000 $250,000 $350,000
Year 3 $600,000 $100,000 $350,000 $250,000
Year 4 $600,000 $40,000 $390,000 $210,000
Year 5 $600,000 $20,000 $410,000 $190,000
Year 6 $600,000 $20,000 $430,000 $170,000
Year 7 $600,000 $55,000 $485,000 $115,000
Year 8 $600,000 $55,000 $540,000 $60,000
Explanation:
a) Data and Calculations:
Cost of special equipment for the dam construction = $600,000
Estimated useful life = 8 years
Salvage value of equipment = $60,000
Depreciable amount = $540,000 ($600,000 - $60,000)
Sum-of-the-years-digit = 36 (8 + 7 + 6 + 5 + 4 + 3 + 2 + 1)
Utilization Schedule for the Special Equipment:
Year Utilization (hr/yr) Unit of Production SYD Depreciation
1 6000 $150,000 (6,000 * $25) $120,000 (8 * $15,000)
2 4000 $100,000 (4,000 * $25) $105,000 (7 * $15,000)
3 4000 $100,000 (4,000 * $25) $90,000 (6* $15,000)
4 1600 $40,000 (1,600 * $25) $75,000 (5 * $15,000)
5 800 $20,000 (800 * $25) $60,000 (4 * $15,000)
6 800 $20,000 (800 * $25) $45,000 (3 * $15,000)
7 2200 $55,000 (2,200 * $25) $30,000 (2 * $15,000)
8 2200 $55,000 (2,200 * $25) $15,000 (1 * $15,000)
Total 21,600 hours
Depreciation rate per hour = $25 ($540,000/21,600)
Sum-of-the-years-digits depreciation rate = $15,000 ($540,000/36)
