Question

# Ivanhoe Company purchased a new machine on October 1, 2017, at a cost of \$ 87,800....

Ivanhoe Company purchased a new machine on October 1, 2017, at a cost of \$ 87,800. The company estimated that the machine has a salvage value of \$ 8,800. The machine is expected to be used for  64,200 working hours during its  8-year life.

Compute depreciation using the following methods in the year indicated.

Declining-balance using double the straight-line rate for 2017 and 2018. (Round answers to 0 decimal places, e.g. 125)

 2017 2018 \$ enter a dollar amount \$ enter a dollar amount

Calculate the depreciation cost per hour. (Round answer to 2 decimal places, e.g. \$1.25)

 Depreciation cost per hour \$ enter the depreciation cost per hour in dollars rounded to 2 decimal places

Units-of-activity for 2017, assuming machine usage was  410 hours. (Round answer to 0 decimal places, e.g. 125)

 Depreciation using the Units-of-activity method for 2017   \$ enter the depreciation using the Units-of-activity method in dollars rounded to 0 decimal places

• Working
 A Cost \$            87,800.00 B Residual Value \$              8,800.00 C=A - B Depreciable base \$            79,000.00 D Life [in years] 8 E=C/D Annual SLM depreciation \$              9,875.00 F=E/C SLM Rate 12.50% G=F x 2 DDB Rate 25.00%

• Requirement 1: Double Declining Balance method
 2017 2018 \$ 5,487.50 \$ 20,578.13 [\$87800 x 25% x 3/12] [(87800 – 5487.50) x 25% x12/12]

• Requirement 2

>Depreciation cost per hour = \$79000 / 64200 hours = \$ 1.23 per hours

>Depreciation using the units of activity method for 2017 = 410 hours x \$ 1.23 = \$ 504

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