Question

jensen company purchased a new machine on october 1, 2022 at a cost of $104,000. the company estimated that the machine has a salvage value of $8,000. the machine is expected to be used for 80,000 working hours during its 8-year life. compute depreciation using the following methods in the year indicated. straight-line for 2022 and 2023, assuming a december 31 year-end. (round answers to o decimal place, eg. 1520.) 2022 2023 straight-line method s etextbook and media declining-balance using double the straight-line rate for 2022 and 2023. 2022 2023 declining-balance method $ etextbook and media units-of-activity for 2022, assuming machine usage was 2,900 hours. (round depreciation per unit to the nearest cent.) units-of-activity method 2022 s etextbook and media

Answer 1

To calculate depreciation using the straight-line method for 2022 and 2023, divide the cost of the machine minus the salvage value by the useful life. For the declining-balance method, multiply the book value by double the straight-line rate. For units-of-activity, divide the cost of the machine minus the salvage value by the total units of activity and multiply by the machine usage.

Step-by-step explanation:

To calculate the depreciation using the straight-line method, we use the formula:

Depreciation Expense = (Cost - Salvage Value) / Useful Life

For 2022 and 2023:

Depreciation Expense = ($104,000 - $8,000) / 8 = $12,000 per year

To calculate the depreciation using the declining-balance method, we use the formula:

Depreciation Expense = Book Value x Double the Straight-line Rate

For 2022 and 2023, the straight-line rate is 1 / 8 = 0.125

Depreciation Expense = Book Value x 0.125 = ($104,000 - Accumulated Depreciation) x 0.125

For units-of-activity, the formula is:

Depreciation Expense per Unit = (Cost - Salvage Value) / Total Units of Activity

Depreciation Expense = Depreciation Expense per Unit x Machine Usage

Depreciation Expense per Unit = ($104,000 - $8,000) / 80,000 = $0.45 per hour

Depreciation Expense = $0.45 x 2,900 = $1,305 for 2022.