Question 1: On January 2, 2007, Jansing Corporation acquired a new machine with an estimated useful life of 5 years. The cost of the machine was $40,000 with an estimated residual value of $5,000.

Prepare a complete depreciation table under:

a.  Straight-line

b.  Double-declining balance

Question 2: Swanson & Hiller, Inc., purchased a new machine on September 1, 2006, at a cost of $108,000. The machine’s estimated useful life at the date of purchase was 5 years, and its residual value was $8,000.

Prepare a complete depreciation schedule under:

a.  Straight-line

b.  Double-declining balance

SOLUTIONS

Question 1:

a. (1) Straight-Line Schedule
Depreciation Expense / Accumulated Depreciation / Book
Year / Computation / Value
2007 / $35,000 ´ 1/5 / $7,000 / $7,000 / $ 33,000
2008 / 35,000 ´ 1/5 / 7,000 / 14,000 / 26,000
2009 / 35,000 ´ 1/5 / 7,000 / 21,000 / 19,000
2010 / 35,000 ´ 1/5 / 7,000 / 28,000 / 12,000
2011 / 35,000 ´ 1¤5 / 7,000 / 35,000 / 5,000
(2) 200% Declining-Balance Schedule
Depreciation Expense / Accumulated / Book
Year / Computation / Depreciation / Value
2007 / $40,000 ´ 40% / $16,000 / $16,000 / $ 24,000
2008 / 24,000 ´ 40% / 9,600 / 25,600 / 14,400
2009 / 14,400 ´ 40% / 5,760 / 31,360 / 8,640
2010 / 8,640 ´ 40% / 3,456 / 34,816 / 5,184
2011 / $5,184 – $5,000 / 184 / 35,000 / 5,000

Question 2:

a. (1) Straight-Line Schedule:
Depreciation Expense / Accumulated Depreciation / Book
Year / Computation / Value
2006 / $100,000 ´ 1¤5 ´ 4¤12 / $6,667 / $6,667 / $101,333
2007 / 100,000 ´ 1¤5 / 20,000 / 26,667 / 81,333
2008 / 100,000 ´ 1¤5 / 20,000 / 46,667 / 61,333
2009 / 100,000 ´ 1¤5 / 20,000 / 66,667 / 41,333
2010 / 100,000 ´ 1¤5 / 20,000 / 86,667 / 21,333
2011 / 100,000 ´ 1¤5 ´ 8¤12 / 13,333 / 100,000 / 8,000
(2) 200% Declining-Balance Schedule:
Depreciation Expense / Accumulated / Book
Year / Computation / Depreciation / Value
2006 / $108,000 ´ 40% x 4¤12 / $14,400 / $14,400 / $93,600
2007 / 93,600 ´ 40% / 37,440 / 51,840 / 56,160
2008 / 56,160 ´ 40% / 22,464 / 74,304 / 33,696
2009 / 33,696 ´ 40% / 13,478 / 87,782 / 20,218
2010 / 20,218 ´ 40% / 8,087 / 95,869 / 12,131
2011 / 100,000 – 95,869 / 4,131 / 100,000 / 8,000