This document discusses four methods for calculating depreciation: (1) straight-line, (2) units of production, (3) number of hours worked, and (4) sum of years digits. It provides examples of how to calculate depreciation under each method using information about an asset's cost, salvage value, expected production/hours, and useful life. It also shows the calculation of depreciation expenses over 10 years using the declining balance method.
1. (Depreciation Computations
(Depreciation Computations
Solution
A) Depreciation under straight line method =( Cost - Salvage value)/ Number of years
= (315000-15000) / 10 i.e 30000
B) Depreciation under units of production method = Cost / Units expected to be produced *
Number of units produced
= 315000/240000 *25500 i.e 33469
C) Depreciation under numbers of hours worked bais = Cost / Expected total hours * Number of
hours worked
= 315000/25000*2650 i.e 33390
D) Sum of years digits = Depreciable base * Remaining life / sum of years
Depreciable base = Cost - Salvage value
= 315000-15000 i.e 300000
Sum of years = n(n+1)/2
= (10*11)/2 i.e 55
Calculation of depreciation under declining balance method
Depreciable amount = 300000
Annual rate = 20%