A company\'s property records revealed the following information about its plant

Question

A company's property records revealed the following information about its plant assets: Calculate the depreciation expense for each machine for the year ended December 31, 2007, and for the year ended December 31, 2008. Machine 1 Cost: $42,000 Salvage Value: 3,000 Purchase Date: 10/1/07 Depreciation Method and Estimated Life-- Straight Line (3 years) Machine #2: Cost $86,000 Salvage Value $8,600 Purchase Date 7/1/07 Depreciation Method and Estimated Life--Double declining balance (5 years) Machine 1: 2008 _______________________ 2009 _______________________ Machine 2: 2008 _______________________ 2009 _______________________

Explanation / Answer

a) $325,000 - $25,000 = $300,000 $300,000/8 = $37,500 annually for 20X1 and 20X2 b) (100% / 8) x 2 = 25% 25% x $325,000 = $81,250 for 20X1 25% x ($325,000 - $81,250) = $60,937.50 (or $60,938) for 20X2 c) ($325,000 - $25,000) / 15,000 hours = $20 per hour $20 x 2,000 = $40,000 for 20X1 $20 x 2,600 = $52,000 for 20X2

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