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