What is recoverable depreciation?

What's accumulated depreciation?

• In recent years Erin Ltd purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarised in the table below. Residual Useful Life Machine/ Acquired / Cost /Value (in years) / Depreciation Method 1 / Jan. 1, 2005 / $ 135 000 / $ 7 000 / 10 /Straight-line 2 / Jan. 1, 2006 /96 000 / 6 000 /8 / Diminishing balance 3 / Jan. 1, 2006 /65 000 /5 000 / 6 /Units-of-productions For the diminishing balance method use a depreciation rate of 20% p.a. For the units-of-production method, total machine hours are expected to be 30 000. Actual hours of use in the first 3 years were: 2006, 500; 2007, 3500; and 2008, 4500. Calculate the amount of accumulated depreciation on each machine at 31 December 2008. (Round all answers to 0 decimal places. ) Machine 1 $__ Machine 2 $__ Machine 3 $ __

• Answer:

  Machine 1 ($135,000 - $7,000) / 10 years = $12,800 per year $12,800 per year x 4 years = $51,200 accumulated depreciation at 31 December 2008 Machine 2 2006 $96,000 x 20% = $19,200 2007 $76,800 x 20% = $15,360 2008 $61,440 x 20% = $12,288 Total accumulated depreciation at 31 December 2008 = $46,848 Machine 3 Depreciation rate: ($65,000 - $5,000) / 30,000 hours = $2 per machine hour 2006 500 hours x $2 per hour = $1,000 2007 3,500 hours x $2 per hour = $7,000 2008 4,500 hours x $2 per hour = $9,000 Total accumulated depreciation at 31 December 2008 = $17,000