Question

Problem 11-11 (Part Level Submission)On January 1, 2015, a machine was purchased for $101,700. The machine has an estimated salvage value of $6,780 and an estimated useful life of 5 years. The machine can operate for 113,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 22,600 hrs; 2016, 28,250 hrs; 2017, 16,950 hrs; 2018, 33,900 hrs; and 2019, 11,300 hrs.(a)Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. 1. Straight-line method 2. Activity Method 3. Sum of the years digits Method 4. Double Declining Balance Method (Round answers to 0 decimal places, e.g. 45,892.)(b)Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the assets life applying each of the following methods. 1. Straight line Method 2. Sum of the years digits Method 3. Double Declining Method

Answer 1

Step-by-step explanation:

Cost of the machine =101700

salvage value -6780

Useful life - 5 years

Depreciable amount = 101700-6780=94920

a)Straight line depreciation

Depreciable amount/ useful years

= (101700-6780)/5

=2015-18,984, 2016-18984, 2017- 18984,2018 -18984, 2019-18984

b)Activity method depreciation

activity/ total level of activity *94920

2015 2016 2017

=22600/113000*94920 28250/113000*94920 16950/113000*94920

=18,984 23,730 14238

2018 2019

33900/113000*94920=28476 11300/113000*94920 =9492

c)Sum of the year digit method

Remain useful life /sum of digit* depreciation amount

2015 2016 2017

5/15 *94920 = $31640 4/15*94920 =25312 3/15*94920= 18984

2018 2019

2/15*94920 =12,656 1/15*94920 =6328

d)Double declining balance method

2*depreciation rate *opening book value (depreciation rate=20%) (1/5*100)

2015 2016 2017

2*20% =101700 = 40680 40%*61020= 24408 40%*36612=14645

2018 2019

$40%*21967 =8787 40%*13180=5272

For fiscal year end September 30 (9 months , 3/4 year)

a)Straight line method = 2015 2016 2017

18984*3/4=14238 18984 18984

2018= 18984 2019= 18984

b)Sum of the years = 2015 2016 2017

31640*3/4 =23,730 25312 18984

2018 12656 2019 66328

c)Double declining method = 2015 =40%*101700*3/4= 30510

2016 =71190*40%=28476

2017 = 42714*40%=17086.

2018 25628*40%=10251

2019=15377*40%=6151