Q11-7E (Different Methods of Depreciati... [FREE SOLUTION]

Chapter 11: Q11-7E (page 586)

(Different Methods of Depreciation) Jackel Industries presents you with the following information.
Description
Date Purchased
Cost
Salvage Value
Life in years
Depreciation Method
Accumulated depreciation to 12/31/18
Depreciation for 2019
Machine A
2/12/17
$142,500
$16,000
10
(a)
$33,350
(b)
Machine B
8/15/16
(c)
21,000
5
SL
29,000
(d)
Machine C
7/21/15
75,400
23,500
8
DDB
(e)
(f)
Machine D
10/12/(g)
219,000
69,000
5
SYD
70,000
(h)
Instructions
Complete the table for the year ended December 31, 2019. The company depreciates all assets using the half-year convention.

Short Answer

Expert verified

Answer

Depreciation for 2019 is as follows:

$19,550
$11,600
$4,333
$35,000

Step by step solution

Step-by-Step SolutionStep 1: Meaning of Depreciation

In financial accounting, depreciation could be a strategy for spreading out the cost of tangible resources over their functional lives. Essentially, it is the disintegration of the value of an asset, which happens over time due to continuous use and abrasion of the asset.

Computing the table for the year ended December 31, 2019

Description	Date Purchased	Cost	Salvage Value	Life in years	Depreciation Method	Accumulated depreciation to 12/31/18	Depreciation for 2019
Machine A	2/12/17	$142,500	$16,000	10	SYD	$33,350	(b) $19,550
Machine B	8/15/16	(c)	21,000	5	SL	29,000	(d) 11,600
Machine C	7/21/15	75,400	23,500	8	DDB	(e) 47,567	(f)4,333
Machine D	10/12/17(g)	219,000	69,000	5	SYD	70,000	(h) 35,000

Working notes:

Machine A鈥擳esting the methods
Straight-Line Method for 2017	$ 6,325
Straight-Line Method for 2018	$12,650
Total Straight Line	$18,975

$\begin{matrix} Depreciation = \frac{颁辞蝉迟鈥塷蹿鈥塧蝉蝉别迟鈭� 厂补濒惫补驳别鈥塿补濒耻别}{鲍蝉别蹿耻濒鈥塴颈蹿别} 脳 \frac{1}{2} \\ = \frac{$ 142, 500 鈭� $ 16, 000}{10} 脳 \frac{1}{2} \\ = $ 6, 325 \end{matrix}$

Machine A鈥擳esting the methods
Double-Declining Balance for 2017	$14,250
Double-Declining Balance for 2018	$25,650
Total Double Declining Balance	$39,900

Computing depreciation for 2017

$\begin{matrix} Depreciation = Cost 脳顿别肠濒颈苍颈苍驳鈥塺补迟别脳 \frac{狈耻尘产别谤鈥塱苍鈥尘辞苍迟丑}{惭辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = $ 142, 500 脳 0.2 脳 0.5 \\ = $ 14, 250 \end{matrix}$

Calculating depreciation for 2018

$\begin{matrix} Depreciation = (Cost 鈭� 顿别辫谤别肠颈补迟辞苍鈥塷蹿鈥� 2017) 脳顿别肠濒颈苍颈苍驳鈥塺补迟别 \\ = ($ 142, 500 鈭� $ 14, 250) 脳 0.2 \\ = $ 25, 650 \end{matrix}$

Machine A鈥擳esting the methods
Sum-of-the-years-digits for 2017	$11,500
Sum-of-the-years-digits for 2018	$21,850
Total Sum-of-the-years-digits	$33,350

Calculating depreciation for 2017

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 142, 500 鈭� $ 16, 000) 脳 \frac{10}{55} 脳 0.5 \\ = $ 126, 500 脳 \frac{10}{55} 脳 0.5 \\ = $ 11, 500 \end{matrix}$

Calculating depreciation for 2018 for life in 10 year

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 142, 500 鈭� $ 16, 000) 脳 \frac{10}{55} 脳 \frac{1}{2} \\ = $ 126, 500 脳 \frac{10}{55} 脳 \frac{1}{2} \\ = $ 11, 500 \end{matrix}$

Calculating depreciation for 2018 for life in 9 year

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 142, 500 鈭� $ 16, 000) 脳 \frac{9}{55} 脳 0.5 \\ = $ 126, 500 脳 \frac{9}{55} 脳 0.5 \\ = $ 10, 350 \end{matrix}$

So total depreciation for 2018 is $21,850 ($14,833+$21,191)

Machine A鈥擳esting the methods

The method used must be SYD

Using SYD, 2019 Depreciation is

$19,550

Calculation of depreciation for life in 9 year

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 142, 500 鈭� $ 16, 000) 脳 \frac{9}{55} 脳 \frac{1}{2} \\ = $ 126, 500 脳 \frac{9}{55} 脳 \frac{1}{2} \\ = $ 10, 350 \end{matrix}$

Calculation of depreciation for life in 8 year

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 142, 500 鈭� $ 16, 000) 脳 \frac{8}{55} 脳 0.5 \\ = $ 126, 500 脳 \frac{8}{55} 脳 0.5 \\ = $ 9, 200 \end{matrix}$

So total depreciation is $19,500 ($10,350+$9,200)

Machine B-Computation of the cost

The asset has been depreciated for 2^1/2years using the straight-line method.

Annual depreciation is then equal to $29,000 divided by 2.5 or $11,600. 11,600 times 5 plus the salvage value is equal to the cost. Cost is $79,000

$\begin{matrix} Cost = (础苍苍耻补濒鈥塪别辫谤别肠颈补迟颈辞苍脳尝颈蹿别鈥塱苍鈥墆别补谤蝉) + 厂补濒惫补驳别鈥塿补濒耻别 \\ = ($ 11, 600 脳 5) + $ 21, 000 \\ = $ 79, 000 \end{matrix}$

Using SL, 2017 Depreciation is $11,600

Machine C鈥攗sing the double-declining balance method of depreciation

Year	Depreciation expense	Calculation
2015鈥檚 depreciation is	$ 9,425	($75400 x .25 x 5)
2016鈥檚 depreciation is	$16,494	($75400 - $9,425) x .25
2017鈥檚 depreciation is	$12,370	($75400 - $25,919) x .25
2018鈥檚 depreciation is	$ 9,278	($75400 - $38,289) x .25
	$47,567

So,Using DDB, 2019 Depreciation is $4,333 ($75,400 鈥� $47,567 鈥� $23,500)

Machine D鈥擟omputation of Year Purchased

First Half Year using SYD	$25,000
Second Year using SYD	$45,000
	$70,000

Calculating depreciation for the first half-year using SYD

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 219, 000 鈭� $ 69, 000) 脳 \frac{5}{15} 脳 .5 \\ = $ 150, 000 脳 \frac{5}{15} 脳 .5 \\ = $ 25, 000 \end{matrix}$

Calculating depreciation for Second Year using SYD for 5 years in life

Calculating depreciation for Second Year using SYD for 4 years in life

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 219, 000 鈭� $ 69, 000) 脳 \frac{4}{15} 脳 .5 \\ = $ 150, 000 脳 \frac{4}{15} 脳 .5 \\ = $ 20, 000 \end{matrix}$

So, the total depreciation expense is $70,000

Thus the asset must have been purchased on October 12, 2017

Using SYD, 2019 Depreciation is $35,000

Calculating depreciation for 4 years in the life

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 219, 000 鈭� $ 69, 000) 脳 \frac{4}{15} 脳 .5 \\ = $ 150, 000 脳 \frac{4}{15} 脳 .5 \\ = $ 20, 000 \end{matrix}$

Calculating depreciation for 3 years in the life

$\begin{matrix} Depreciation = (颁辞蝉迟鈥� 鈭� 厂补濒惫补驳别鈥塿补濒耻别) 脳 \frac{狈耻尘产别谤鈥塷蹿鈥墆别补谤}{厂耻尘鈥塷蹿鈥墆别补谤蝉鈥塪颈驳颈迟} 脳 \frac{狈耻尘产别谤鈥塷蹿鈥媘辞苍迟丑}{狈耻尘产别谤鈥塷蹿鈥尘辞苍迟丑鈥塱苍鈥塧鈥墆别补谤} \\ = ($ 219, 000 鈭� $ 69, 000) 脳 \frac{3}{15} 脳 .5 \\ = $ 150, 000 脳 \frac{3}{15} 脳 .5 \\ = $ 15, 000 \end{matrix}$

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(in millions)	December 31, 2014	December 31, 2013
Total assets	\(910.4	\)888.4
Total liabilities	219.3	208.1
Net sales	539.9	539.6
Net income	63.2	60.8

91影视

Short Answer

Step by step solution

Step-by-Step SolutionStep 1: Meaning of Depreciation

Computing the table for the year ended December 31, 2019

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