help with Problem 9-7A Financial Accounting In recent years, Farr Company has pu

Question

help with Problem 9-7A Financial Accounting

In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.

Machine

Acquired

Cost

Salvage
Value

Useful Life
(in years)

Depreciation
Method

For the declining-balance method, Farr Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 35,000. Actual hours of use in the first 3 years were: 2013, 720; 2014, 5,590; and 2015, 7,070.

Compute the amount of accumulated depreciation on each machine at December 31, 2015.

Accumulated Depreciation at December 31

MACHINE 1   

MACHINE 2

MACHINE 3

If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2013? In 2014?

2013

2014

Machine

Acquired

Cost

Salvage
Value

Useful Life
(in years)

Depreciation
Method

1 Jan. 1, 2012 $135,000 $47,800 8 Straight-line 2 July 1, 2013 86,000 11,700 5 Declining-balance 3 Nov. 1, 2013 80,840 7,340 6 Units-of-activity

Explanation / Answer

a)   Machine 1

     Depreciaiton per year =( $135000 - $47800) / * 8years

= $10900 Per year

Year Depreciation Accumulated Depreciation   

2012 10900 10900

2013 10900 21800

2014 10900 32700

2015 10900 43600

  

  

  Machine 2

Straight line depreciation rate= 1/5 years * 100

= 20%

Double decline rate = 2 * 20%

= 40%

Year Book Value Depreciation Accumulated Depreciation   

2013 86000 86000 * 6/12 months * 40% = $17200 17200

2014 (86000-17200)=68800 68800 * 40% = $27520 44720

2015 68800 - 27520 =41280 41280*40% = 16512 61232

  Machine 3

      units depreciation hour rate = (80840 -7340) / 35000 hour

= $2.1 per hour

   Year Depreciation Accumulated Depreciation

2013    720 hour *$2.1=$1512 1512

   2014 5590 *$2.1 =$11739 13251

   2015 7070 *$2.1 =14847 28098

b Year Book Value Depreciation

2013 86000 86000*9/12months * 40% = $25800

2014 86000 -25800=$60200 60200 *40% =$24080

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.