Depreciation Problems, 2022/2023

TUTORIAL NO 7: DEPRECIATION CALCULATIONS

PART A: Straight Line Method
1. A construction company purchased a bulldozer for $150,000. It has an estimated useful life of 10
years and an estimated salvage value of $20,000. Calculate the annual depreciation expense using the
straight-line method.
2. A construction company acquired a crane for $500,000. The crane has an estimated useful life of 8
years and no salvage value. Calculate the annual depreciation expense using the straight-line method.
3. A construction company purchased a building for $2,000,000. The building has an estimated useful
life of 40 years and a salvage value of $200,000. Calculate the annual depreciation expense using the
straight-line method.
4. A construction company purchased a fleet of trucks for $800,000. The trucks have an estimated
useful life of 5 years and a salvage value of $50,000. Calculate the annual depreciation expense using the
straight-line method.
5. KAZIMOTO & Company purchased a concrete mixer of Tshs. 5,000,000 on January 1, 2015. The
machine is expected to have a salvage value of Tshs. 600,000 at the end of its 5 year useful life. During the
useful life, the machine is expected to be used for 5,000 hours. During the 5 years the machine was used
as under:
Years Hours Used
2015 1200
2016 800
2017 1150
2018 850
2019 1000

Required: Prepare a Schedule of Depreciation on the basis of Straight Line method.

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 Depreciation Problems, 2022/2023

PART B: Declining Balance Method

1. A construction company purchased a specialized piece of equipment for $100,000. It has an estimated
useful life of 7 years and no salvage value. Calculate the annual depreciation expense using the
declining balance method with a depreciation rate of 20%.

2. Company XYZ purchased a machine for $50,000. The machine has an estimated useful life of 5 years
and a salvage value of $5,000. The company uses the declining balance method with a depreciation
rate of 30%. Calculate the depreciation expense for the second year.

3. A construction company purchased a crane for $500,000. The crane has an estimated useful life of 10
years and no salvage value. Calculate the annual depreciation expense using the declining balance
method with a depreciation rate of 20%.

4. A construction company acquired a fleet of vehicles for $800,000. The vehicles have an estimated
useful life of 5 years and no salvage value. Calculate the annual depreciation expense using the
declining balance method with a depreciation rate of 30%.

5. A construction company purchased a specialized piece of equipment for $200,000. It has an estimated
useful life of 8 years and no salvage value. Calculate the annual depreciation expense using the
double-declining balance method.
6. A construction company acquired a building for $2,000,000. The building has an estimated useful life
of 40 years and no salvage value. Calculate the annual depreciation expense using the double-
declining balance method.

7. A construction company purchased a bulldozer for $300,000. The bulldozer has an estimated useful
life of 5 years and a salvage value of $50,000. Calculate the annual depreciation expense using the
double-declining balance method.

8. KAZIMOTO & Company purchased a concrete mixer of Tshs. 5,000,000 on January 1, 2015. The
machine is expected to have a salvage value of Tshs. 600,000 at the end of its 5 year useful life.
During the useful life, the machine is expected to be used for 5,000 hours. During the 5 years the
machine was used as under:
Years Hours Used
2015 1200
2016 800
2017 1150
2018 850
2019 1000

Required: Prepare a Schedule of Depreciation on the basis of Double declining balance method.

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 Depreciation Problems, 2022/2023

PART C: Unit Of Production Method

1 KAZIMOTO & Company purchased a concrete mixer of Tshs. 5,000,000 on January 1, 2015. The
machine is expected to have a salvage value of Tshs. 600,000 at the end of its 5 year useful life. During the
useful life, the machine is expected to be used for 5,000 hours. During the 5 years the machine was used
as under:
Years Hours Used
2015 1200
2016 800
2017 1150
2018 850
2019 1000

Required: Fill the required information in the Schedule of Depreciation here below on the basis of the
following methods;
a) Unit of Production method
b) Sum of years Digits Method

SCHEDULE OF DEPRECIATION
Years Cost Hours Rate per Hour Annual Accumulated Book
(Tshs) used Depreciation Depreciation Value
2015 5,000,000 1200
2016 5,000,000 800
2017 5,000,000 1150
2018 5,000,000 850
2019 5,000,000 1000

2. A small delivery truck purchased by Mnawa Enterprise on January 1, 2014:

Cost Tshs.13,000,000.00
Expected salvage value Tshs.1,000,000.00
Estimated useful life ( years) 5
Estimated useful life ( miles) 100,000

Miles expected used are:

Required: Prepare Schedule of Depreciation on the basis of Units of Output Method.

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 Depreciation Problems, 2022/2023

PART D: Sum of Years Digit Method

1. A Computer Company has purchased a computer worth Tshs. 2,000,000.00. It cost them Tshs.
20,000.00 to transport the Computer to their location. The Company considers that the useful life of
Computer is five years and they can expire the computer at a value of Tshs. 500,000.
Required: Prepare a depreciation schedule for the asset using the Sum of year depreciation method using
the format below;

Remaining Life
Opening book

Depreciation

Depreciation

Ending book
Expense

(Tshs.)
(Tshs.)

Factor
value

value
span
Year

Year 1
Year 2
Year 3
Year 4
Year 5

NOTE:
 Depreciation factor = useful life/ sum of useful years. or
 Depreciation factor = remaining life span/SYD
 Depreciable amount = Total Cost - Salvage Value
 Depreciation expense = Depreciation factor x Depreciable amount

2. VADA Construction Company purchased a Poker vibrator for Tshs. 3,000,000 on January 1, 2018.
The machine is expected to have a salvage value of Tshs. 600,000 at the end of its 5 year useful life.
During the useful life, the machine is expected to be used for 10,000 hours.
Required: prepare a Schedule of Depreciation on the basis of Sum of years Digits Method

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