In early July 2015, Masterton Ltd is considering the acquisition of some machinery for $1 200 000 plus GST to be used in the manufacture of a new product. The machinery has a useful life of 10 years, during which management plans to produce 500 000 units of the new product. The residual value of the machinery is $100 000.
The following projections were made in order to select a depreciation method to be used for the machinery:
In calculating the profit before depreciation, all expenses have been deducted, including the repairs and maintenance expense.
Q:As the accountant for Masterton Ltd, prepare separate depreciation schedules for the machinery for the 5-year period, using the following depreciation methods: (a) straight-line, (b) diminishing balance, (c) sum-of-years’-digits, and (d) units-of-production. Use the following headings for each schedule: ‘Year ending 30 June’, ‘Annual depreciation expense’, ‘Accumulated depreciation’, ‘Carrying amount at end of year’.
Units ofRepairs andProfit beforeYear ended 30 Juneoutputmaintenancedepreciation201650 090$ 70 000$350 09020174500060 090340 09020185500090 09036509020195809095090360 090202060 090109000380 090