Question

Skysong Company purchased a new machine on September 1, 2022 at a cost of $125,000. The company estimated that the machine will have a salvage value of $12,000. The machine is expected to be used for 10,000 working hours during its 5-year life. (a) Your answer is correct. Compute the depreciation expense under the Straight-line method for 2022 2023 and 2024. (Round answers to decimal places, eg. 15250.) Depreciation expense for 2022 - $ 7533 2023 - $ 22600 2024 - $ 22600 e Textbook and Media Question 7 of 13 < > 0.6/3 (b) Compute the depreciation expense under the Units-of-activity for 2022, assuming machine usage was 740 hours. Depreciation expense for 2022 - $ e

Answer 1

The depreciation expense under the Straight-line method for 2022, 2023, and 2024 is $7.33, $7.14, and $7.14 respectively.

Step-by-step explanation:

The depreciation expense under the Straight-line method for 2022, 2023, and 2024 can be calculated by subtracting the salvage value from the cost of the machine and dividing it by the number of working hours.

For 2022: Depreciation expense = ($125,000 - $12,000) / 10,000 hours = $7.33

For 2023 and 2024: Depreciation expense = ($125,000 - $12,000) / 10,000 hours = $7.14

Answer 2

To calculate depreciation for Skysong Company's new machine under straight-line method, the expenses for 2022, 2023, and 2024 are respectively $7,533, $22,600, and $22,600. Using units-of-activity method for 2022 with 740 hours of usage, the depreciation expense is $8,362.

Step-by-step explanation:

The depreciation expense can be calculated using different methods. For the straight-line method, depreciation is calculated by subtracting the salvage value of the asset from the cost and then dividing by the useful life of the asset. For the unit-of-activity method, the cost less salvage value is first divided by the total units of production the asset is expected to provide (in this case, working hours), and then that rate is multiplied by the units of production for the period.

For the straight-line method calculation:

Depreciable Amount = Cost - Salvage Value

= $125,000 - $12,000

= $113,000

Annual Depreciation Expense = Depreciable Amount / Useful Life

= $113,000 / 5

= $22,600

For the partial year of 2022, since the machine was purchased on September 1, only 4 months of depreciation should be recorded:

Depreciation Expense 2022 (Straight-Line) = (Annual Depreciation Expense / 12) x 4

= ($22,600 / 12) x 4

= $7,533

Given the straight-line depreciation expense is uniform, the following years' (2023 and 2024) expenses will each be:

Depreciation Expense 2023 & 2024 (Straight-Line) = Annual Depreciation Expense

= $22,600

For the units-of-activity method calculation for 2022:

Depreciation per Hour = Depreciable Amount / Total Estimated Working Hours

= $113,000 / 10,000

= $11.30

Depreciation Expense 2022 (Units-of-activity) = Depreciation per Hour x Hours Used

= $11.30 x 740

= $8,362