Question

Exercise 11-4 Crane Corp. purchased machinery for $330,750 on May 1, 2017. It is estimated that it will have a useful life of 10 years, salvage value of $15,750, production of 252,000 units, and working hours of 25,000. During 2018, Crane Corp. uses the machinery for 2,650 hours, and the machinery produces 26,775 units. From the information given, compute the depreciation charge for 2018 under each of the following methods. (Round intermediate calculations to 2 decimal places, e.g. 5.25 and final answers to 0 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

a)straight line:
depreciaiton per month=(cost-salvage)/no of months
=(330750-15750)/(10*12)
=2625
from may to dec it is 8 months
depreciation=8*2625=21000

b)units of output:
depreiciation per unit=(cost-salvage)/no of units
=(330750-15750)/252000
=1.25
total units in 2018=26775
depreciation=1.25*26775=33468.75

c)working hours:
depreiciation per hour=(cost-salvage)/total hours
=(330750-15750)/25000
=12.60
total ours in 2018=2650
depreciation=12.6*2650=33390

d)sum of years digits:
=10*11/2=55
depreciation for 2018=(8/12)*(10/55)*(330750-15750)
=38181.82

e)double decline:
depreication rate=2/10=20%
2018=20%*(330750-15750)
=63000