Question

Tamarisk Corp. purchased machinery for $347,400 on May 1, 2020. It is estimated that it will have a useful life of 10 years, salvage value of $17,400, production of 264,000 units, and working hours of 25,000. During 2021, Tamarisk Corp. uses the machinery for 2,650 hours, and the machinery produces 29,580 units.

From the information given, compute the depreciation charge for 2021 under each of the following methods. (Round intermediate calculations to 2 decimal places, eg. 5.25 and final answers to O decimal places, e.g. 45,892.)
(a) Straight-line
(b) Units-of-output
(c) Working hours
(d) Sum-of-the-years'-digits
(e) Declining-balance (use 20% as the annual rate) $

Answer 1

Step-by-step explanation:

Purchase price = 347,400

Useful life = 10 years

Salvage value = 17,400

Production unit = 264,000

Unit produce = 29,580

Working hours = 25,000

Working hours used = 2,650

Workings

Depreciable amount = 347,400 - 17,400 = 330,000

1. Straight line depreciation = 347,400-17,400 /10

= 330,000 / 10 =33,000

2.Units of output = 29,580/264,000*330,000

= 36,975

3. Working hours method

2650/25,000*330,000 = 34,980

4.Sum of the years digit

Sum of the digits = 10(10+1)/2 =55

330,000 *10/55*4/12 +330,000*9/55*8/12 = 56,000

5 Declining balance at 20%

2020 = ( 347,400 *20%) = 69,480

2021 = 347,400 -69,480 * 20% =277,920 *20%

277,920 - 55,584 = 222,336