Question

Skysong Company purchased Machine #201 on May 1, 2025. The following information relating to Machine #201 was gathered at the end of May.

Price $95,200
Credit terms 2/10, n/30
Freight-in $896
Preparation and installation costs $4,256
Labor costs during regular production operations $11,760

It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Skysong intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,680. The invoice for Machine #201 was paid May 5, 2025. Skysong uses the calendar year as the basis for the preparation of financial statements.

(a)

Compute the depreciation expense for the years indicated using the following methods.
Depreciation Expense
1. Straight-line method for 2025 $enter a dollar amount
2. Sum-of-the-years'-digits method for 2026 $enter a dollar amount
3. Double-declining-balance method for 2025 $enter a dollar amount

Answer 1

The depreciation expense for Machine #201 can be calculated using the straight-line, sum-of-the-years'-digits, and double-declining-balance methods.

Step-by-step explanation:

The depreciation expense for Machine #201 can be calculated using different methods:

Straight-line method for 2025: The depreciation expense for the first year is equal to the cost of the machine divided by its useful life. In this case, it would be $95,200 / 8 years = $11,900.

Sum-of-the-years'-digits method for 2026: The depreciation expense for the second year can be calculated using the sum-of-the-years'-digits formula. First, calculate the total sum of the digits: 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 36. Then, calculate the fraction for the second year: 7 / 36. Finally, multiply this fraction by the cost of the machine: (7 / 36) x $95,200 = $18,711.11.

Double-declining-balance method for 2025: The depreciation rate for this method is twice the straight-line rate, which is calculated as 1 / useful life. In this case, it would be 1 / 8 years = 0.125. Then, multiply this rate by the cost of the machine: 0.125 x $95,200 = $11,900.