Exercise 11-3 Depreciation methods; partial years [LO11-2]

On October 1, 2016, the Allegheny Corporation purchased machinery for $299,000. The estimated service life of the machinery is 10 years and the estimated residual value is $2,000. The machine is expected to produce 540,000 units during its life.

Required:

Calculate depreciation for 2016 and 2017 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.

1.	Straight line.

Straight-Line Depreciation
	Choose Numerator:	/	Choose Denominator:	=	Annual Depreciation
		/		=	Annual Depreciation
		/		=
Year	Annual Depreciation	x	Fraction of Year	=	Depreciation Expense
2016		x		=
2017		x		=

2.

Sum-of-the-years digits

Sum-of-the-years' digits depreciation
	Depreciable Base	x	Rate per Year	x	Fraction of Year	=	Depreciation Expense
10/1/2016 through 12/31/2016		x		x		=
Total depreciation expense - 2016
1/1/2017 through 9/30/2017		x		x		=
10/1/2017 through 12/31/2017		x		x		=
Total depreciation expense - 2017

3.	Double-declining balance.

	Depreciation for the Period				End of Period
Annual Period	Beginning of Period Book Value	Depreciation Rate	Fraction of Year	Depreciation Expense	Accumulated Depreciation	Book Value
2016
2017

4.

One hundred fifty percent declining balance.

	Depreciation for the Period				End of Period
Annual Period	Beginning of Period Book Value	Depreciation Rate	Fraction of Year	Depreciation Expense	Accumulated Depreciation	Book Value
2016
2017

5.

Units of production (units produced in 2016, 27,000; units produced in 2017, 42,000)

Select formula for Units of Production Depreciation:
Calculate 2016 depreciation expense:
Depreciation per unit rate
Units produced in 2016
Depreciation in 2016
Calculate 2017 depreciation expense:
Depreciation per unit rate
Units produced in 2017
Depreciation in 2017