Question

A schedule of machinery owned by Waterway Industries is presented below:

Total Cost Estimated Salvage Value Estimated Life in Years
Machine X $593000 $40000 14
Machine Y 816000 82000 10
Machine Z 301000 61000 6

Waterway computes depreciation by the composite method. The composite rate of depreciation (in percent) for these assets is :_________

a. 8.44.
b. 8.94.
c. 13.74.
d. 10.17.

Answer 1

b. 8.94%

Step-by-step explanation:

Cost Salvage Depreciable cost Life Depreciation

Machine X 593,000 40,000 553,000 14 39,500

Machine Y 816,000 82,000 734,000 10 73,400

Machine Z 301,000 61,000 240,000 6 40,000

1,710,000 1,527,000 152,900

Composite Rate = Total Depreciation/Total Cost

Composite Rate = 152,900 / 1,710,000

Composite Rate = 0.089415205

Composite Rate = 8.94%