On January 1, 2018, the Allegheny Corporation purchased machinery for $115,000. The estimated service life of the machinery is 10 years and the estimated residual value is $5,000. The machine is expected to produce 220,000 units during its life. Required: Calculate depreciation for 2018 and 2019 using each of the following methods. 1. Straight line. 2. Sum-of-the-years'-digits. 3. Double-declining balance. 4. One hundred fifty percent declining balance.

Instructions are listed below

Explanation:

Giving the following information:

Machine costs = $115,000.

The estimated service life of the machinery is 10 years.

The estimated residual value is $5,000.

The machine is expected to produce 220,000 units during its life.

1) straight line depreciation = (Machine purchase price - residual value) / use life

straight line depreciation = (115000 - 5000) / 10 = 11000

2018 = 11000

2019 = 11000

2) sum of the years' method = (remaining useful life of the asset/sum of the years' digits) * depreciable cost

2018 = 10 / (10+9+8+7+6+5+4+3+2+1) * (115000-5000) = 110000/55 = (10/55) * 110000 = 20000

2019 = (9/55) * 110000 = 18000

3) Double declining balance method = 2 * [ (Asset cost - residual value) / useful life of the asset]

2018 = (1100000/10) * 2 = 22000

2019 = (110000-22000/10) * 2 = 17600

4) One hundred fifty percent declining balance = [ (purchase value-salvage value) / use years]*1.5

2018 = (110000/10) * 1.5 = 16500

2019 = [ (110000-16500) / 10]*1.5 = $14025