Final answer:
The annual depreciation charges for a machine with a purchase price of $120,000, a salvage value of $6,000, and a useful life of 6 years can be calculated using methods such as Straight-Line depreciation. For Straight-Line, the annual charge is $19,000, calculated by dividing the depreciable base ($114,000) by the useful life (6 years).
Step-by-step explanation:
The student's question is asking how to calculate the annual depreciation charges for a machine over its useful life using different methods of depreciation. Given the cost of the machine, its salvage value, and its useful life, different depreciation techniques can be applied.
Depreciation Methods
There are several methods to calculate depreciation, such as the Straight-Line method, Double Declining Balance method, and Units of Production method. In the Straight-Line method, the annual depreciation expense is the same each year. In the Double Declining Balance method, depreciation is accelerated, and more expense is recognized in the earlier years. The Units of Production method involves calculating an expense based on the number of units the machine produces.
Depreciation Calculation
For the Straight-Line method:
Initial cost of the machine: $120,000
Salvage value: $6,000
Useful life: 6 years
Annual depreciation expense = (Cost - Salvage value) / Useful life
Annual depreciation expense = ($120,000 - $6,000) / 6
Annual depreciation expense = $114,000 / 6
Annual depreciation expense = $19,000 per year
Applying this approach, the machine would depreciate $19,000 annually for 6 years.