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# week 7 - EXERCISE 11-1(1520 minutes(a Straight-line method...

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EXERCISE 11-1 (15–20 minutes) (a) Straight-line method depreciation for each of Years 1 through 3 = \$518,000 – \$50,000 = \$39,000 12 (b) Sum-of-the-Years’-Digits = 12 X 13 = 78 2 12/78 X (\$518,000 – \$50,000) = \$72,000 depreciation Year 1 11/78 X (\$518,000 – \$50,000) = \$66,000 depreciation Year 2 10/78 X (\$518,000 – \$50,000) = \$60,000 depreciation Year 3 (c) Double-Declining-Balance method depreciation rate. 100 % X 2 = 16.67% 12

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\$518,000 X 16.67% = \$86,351 depreciation Year 1 (\$518,000 – \$86,351) X 16.67% = \$71,956 depreciation Year 2 (\$518,000 – \$86,351 – \$71,956) X 16.67% = \$59,961 depreciation Year 3 EXERCISE 11-4 (15–25 minutes) (a) \$279,000 – \$15,000 = \$264,000; \$264,000 ÷ 10 yrs. = \$26,400 (b) \$264,000 ÷ 240,000 units = \$1.10; 25,500 units X \$1.10 = \$28,050 (c) \$264,000 ÷ 25,000 hours = \$10.56 per hr.; 2,650 hrs. X \$10.56 = \$27,984 (d) 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 OR n(n + 1) = 10( 1 1 ) = 5 5
2 2 10 X \$264,000 X 1/3 = \$16,0 00 55 9 X \$264,000 X 2/3 = 28,8 00 55 Total for 2011 \$44,8 00 (e) \$279,000 X 20% X 1/3 = \$18, 6 0 0 [\$279,000 – (\$279,000 X 20%)] X 20% X 2/3 = 29, 7 6 0

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Total for 2011 \$48, 3 6 0 [May also be computed as 20% of (\$279,000 – 2/3 of 20% of \$279,000)]
EXERCISE 11-6 (20–30 minutes) (a) 2010 Straight- line \$304,000 – \$16,000 = \$36,000/year 8 3 months—Depreciation (\$36,000 X 3/12) = \$9,000 (b) 2010 Output \$304,000 – \$16,000 = \$7.20/output unit 40,000 1,000 units X \$7.20 = \$7,200 (c) 2010 Working hours \$304,000 – \$16,000 = \$14.40/hour 20,000 525 hours X \$14.40 = \$7,560

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(d) 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 36 OR n(n + 1) = 8(9) = 36 2 2 Allocated to Sum-of-the-years’- digits Total 2010 2011 2012 Yea r 1 8/36 X \$288,000 = \$64,00 0 \$16,000 \$48,000 2 7/36 X \$288,000 = \$56,00 0 14,000 \$42,000 3 6/36 X \$288,000 = \$48,00 0 12,000 \$16,000 \$62,000 \$54,000 2012: \$54,000 = (9/12 of 2 nd year of machine’s life plus 3/12 of 3 rd year of machine’s life) (e)Double-declining-balance 2011: 1/8 X 2 = 25%. 2010: 25% X \$304,000 X 3/12 = \$19,000 2011: 25% X (\$304,000 – \$19,000) = \$71,250
OR 1 st full year (25% X \$304,000) = \$76,000 2 nd full year [25% X (\$304,000 – \$76,000)] = \$57,000 2010 Depreciation 3/12 X \$76,000 = \$19,000 2011 Depreciation 9/12 X \$76,000 = \$57,000 3/12 X \$57,000 = 14,250 \$71,250 EXERCISE 11-8 (20–25 minutes) Old Machine June 1, 2008 Purchase. ................................. \$31,800 Freight. ..................................... 200 Installation. .............................. 500 Total cost. ........................... \$32,500

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Annual depreciation charge: (\$32,500 – \$2,500) ÷ 10 = \$3,000 On June 1, 2009, debit the old machine for \$2,700; the revised total cost is \$35,200 (\$32,500 + \$2,700); thus the revised annual depreciation charge is: (\$35,200 – \$2,500 – \$3,000) ÷ 9 = \$3,300. Book value, old machine, June 1, 2012:
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week 7 - EXERCISE 11-1(1520 minutes(a Straight-line method...

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