Depreciation of Machinery

In early July 2013 Admirable Ltd is considering the acquisition of some machinery for $1200 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:

Year ended 30 June Units of output Repairs  and maintenance Profit  before depreciation
2014

2015

50 000

45000

$ 70000

60000

$350000

340000

2016 55000 90000 355000
2017 58000 95000 360000
2018 60 000 100000 380000

In calculating  the  profit  before  depreciation,  all  expenses  have  been  deducted,  including  the repairs and maintenance expense.

Required

As the accountant for Admirable 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’.

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