Question

# On January 1, 2018, a machine was purchased for \$105,000. The machine has an estimated salvage...

On January 1, 2018, a machine was purchased for \$105,000. The machine has an estimated salvage value of \$8,100 and an estimated useful life of 5 years. The machine can operate for 114,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 22,800 hrs; 2019, 28,500 hrs; 2020, 17,100 hrs; 2021, 34,200 hrs; and 2022, 11,400 hrs.

Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.)

 1. Straight-line Method \$ 2. Activity Method Year 2018 \$ 2019 \$ 2020 \$ 2021 \$ 2022 \$ 3. Sum-of-the-Years'-Digits Method Year 2018 \$ 2019 \$ 2020 \$ 2021 \$ 2022 \$ 4. Double-Declining-Balance Method Year 2018 \$ 2019 \$ 2020 \$ 2021 \$ 2022 \$

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Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.)

 Year Straight-line Method Sum-of-the-years'-digits method Double-declining-balance method 2018 \$ \$ \$ 2019 2020 2021 2022 2023

CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD
Purchase Cost of Equipment = \$                       105,000
Less: Salvage Value \$                            8,100
Net Value for Depreciation (A) \$                         96,900
Useful life of the Assets (B)                                        5 Years
Depreciation per year = Value for Depreciation (A/B) \$                         19,380
Year   Assets Cost Depreciation Expenses Accumulated Depreciation Book Value
Purchase                             105,000 \$             105,000
Year 2018 \$              19,380 \$           19,380 \$               85,620
Year 2019 \$              19,380 \$           38,760 \$               66,240
Year 2020 \$              19,380 \$           58,140 \$               46,860
Year 2021 \$              19,380 \$           77,520 \$               27,480
Year 2022 \$              19,380 \$           96,900 \$                  8,100
CALCULATION OF THE DEPRECIATION AS PER UOP METHOD
Purchase Cost of Equipment = \$                       105,000
Less: Salvage Value = \$                            8,100
Net Value for Depreciation (A) \$                         96,900
Expected to Produce in Units (B)                           114,000 Hrs
Depreciation per Units = (A/B) \$                              0.85 Per Hours
Year   Units Depreciable Units X Rate Per Unit = Depreciation Expenses Accumulated Depreciation Book Value
Year 2018                              22,800                  22,800 X \$                0.85 = \$               19,380 \$             19,380 \$           85,620
Year 2019                              28,500                  28,500 X \$                0.85 = \$               24,225 \$             43,605 \$           61,395
Year 2020                              17,100                  17,100 X \$                0.85 = \$               14,535 \$             58,140 \$           46,860
Year 2021                              34,200                  34,200 X \$                0.85 = \$               29,070 \$             87,210 \$           17,790
Year 2022                              11,400                  11,400 X \$                0.85 = \$                  9,690 \$             96,900 \$             8,100
CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD
Purchase Cost of Equipment = \$                       105,000
Rate of Depreciation =
Rate of Depreciation = (1 / 5 Years ) 0.20 or 20%
(Depreciation / Purchase price )
Double decline deprecation rate = 20.00% * 2 = 40.0%
Year   Assets Cost Beginning Book Value X Rate of Depreciation = Depreciation Expenses Accumulated Depreciation Book Value
Purchase                             105,000 \$        105,000
Year 2018 \$            105,000 X 40.00% = \$               42,000 \$             42,000 \$           63,000
Year 2019 \$              63,000 X 40.00% = \$               25,200 \$             67,200 \$           37,800
Year 2020 \$              37,800 X 40.00% = \$               15,120 \$             82,320 \$           22,680
Year 2021 \$              22,680 X 40.00% = \$                  9,072 \$             91,392 \$           13,608
Year 2022 \$              13,608

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