Respuesta :
Answer:The NBV for the third year is $40,000, The NBV for the third year is $292,000, The NBV for the third year is $7, 030.40
Explanation:
Straight line method
Cost - Salvage value/number of years
400,000-40,000/3
= 360,000/3
= 120,000
$
Ist year cost. 400,000
Less: Depreciation. 120,000
2nd year 280,000
Less:Depreciation. 120,000
3rd year. 160,000
Less:Depreciation. 120,000
Total. 40,000
Profit and Loss Account
Ist year provision for deprecation 280;000
2nd year provision for depreciation 160,000
3rd year provision for depreciation 40,000
$
$ $ $
1st year. Cost. Dep. NBV
400,000. 120,000. 280,000
2nd year. 280,000 120,000. 160,000
3rd year. 160,000. 120,000 40,000
Balance Sheet
Net Book value : This is the cost of the asset less depreciation to date.
Machine hour method
Depreciation per hour = Cost of machine - Salvage value /Total machine hour
400,000-40,000/20,000
=360,000/20,00. = $ 18
Depreciation for year 1= 18*3,000= $54,000
Depreciation for year 2= 18*1,8,000= $324,000
Depreciation for year 3= 18*6,000= $ 108,000
Balance sheet
$ $ $
Year Cost. Dep. NBV
1st year. 400,000 54,000. 436,000
2nd year. 400,000. 324,000. 76,000
3rd year. 400,000. 108,000. 292,000
Reducing balance method
Reducing balance method
To calculate the rate, we use the formula
r= 1-n√S/C where
r= rate of depreciation
S= Salvage value
C=Cost of the asset
n= number of years
r= 1-4√ 40,000/400,000
= 1-4√0.1
= 0.26
= 1- 0.26
= 0.74
= 0.74 × 100
= 74%
Therefore the rate is 74%
$
Ist year 74% of 400,000. 400,000
296,000
2nd year 74% of 104,000. 104,000
76,960
3rd year 74% of 27,040. 27,040
20,009.6
4th year 74% of 7,030.4. 7,030.4
5,202.49
Total. 1,827.90
Profit and Loss Account
$
Ist year profit and loss 296,000
2nd year profit and loss 76,960
3rd year profit and loss 20,009.60
4th year profit and loss 5,202.49
Balance Sheet
$ $ $
Year. Cost. Dep. NBV
1. 400,000. 296,000. 104,000
2. 104,000 76,960. 27,040
3. 27,040. 20,009.60. 7,030.40
4. 7,030.40. 5,202.49. 1,827.90
The machine's book values at the end of year 3 are as follows under the three depreciation methods:
1. Straight-line = $130,000.
2. Units-of-production = $94,000.
3. Double-declining-balance = $50,000.
Data and Calculations:
Straight-line Method:
Cost of machinery = $400,000
Residual value = $40,000
Depreciable amount = $360,000 ($400,000 - $40,000)
Useful life = 4 years
Annual depreciation expense = $90,000 ($360,000/4)
Accumulated depreciation, Year 3 = $270,000 ($90,000 x 3)
Book value, Year 3 = $130,000 ($400,000 - $270,000)
Units-of-production depreciation method:
Cost of machinery = $400,000
Residual value = $40,000
Depreciable amount = $360,000 ($400,000 - $40,000)
Useful life = 20,000 machine hours
Depreciation expense per machine hour = $18 ($360,000/20,000)
Accumulated Depreciation, Year 3 = $306,000 (3,000 + 8,000 + 6,000) x $18
Book value, Year 3 = $94,000 ($400,000 - $306,000)
Double-declining-balance depreciation method:
Cost of machinery = $400,000
Residual value = $40,000
Depreciable amount = $360,000 ($400,000 - $40,000)
Useful life = 4 years
Depreciation rate = 50% (100/4 x 2)
Year 1 Depreciation Expense = $200,000 (400,000 x 50%)
Declined value = $200,000 (400,000 - $200,000)
Year 2 Depreciation Expense = $100,000 ($200,000 x 50%)
Declined value = $100,000 ($400,000 - $300,000)
Year 3 Depreciation Expense = $50,000 ($100,000 x 50%)
Accumulated Depreciation, Year 3 - $350,000 ($200,000 + $100,000 + $50,000)
Book value, Year 3 = $50,000 ($400,000 - $350,000)
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