In recent years, Farr Company has purchased three machines. Because of frequent

Question

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. 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 33,000. Actual hours of use in the first 3 years were: 2013, 760; 2014, 6,140; and 2015, 7,460. Compute the amount of accumulated depreciation on each machine at December 31, 2015. 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?

Explanation / Answer

STRAIGHT LINE METHOD OF DEPRECIATION MACHINE COST $1,39,000 SALVAGE 49,000 LIFE 9 DEPRECIATION $10,000 DATE OPENING WDV DEPRECIATION CLOSING WDV 31/12/2012 $1,39,000 $10,000 $1,29,000 31/12/2013 $1,29,000 $10,000 $1,19,000 31/12/2014 $1,19,000 $10,000 $1,0,9000 31/12/2015 $1,0,9000 $10,000 99,000 ACCUMULATED DEPRECIATION $40,000 ORIGINAL COST IS SAME IN EACH YEAR =$1,39,000 DOUBLE DECLING BALANCE METHOD MACHINE COST $74,000 SALVAGE 11,600 LIFE 5 DEPRECIATION $12,480 STRAIGHT LINE RATE OF DEPRECIATION=B21/(B18-B19) 0.199361022 20% DoublE DECLINING RATE 40% DATE OPENING WDV DEPRECIATION CLOSING WDV 31/12/2013 $74,000 $14,800 $59,200 31/12/2014 $59,200 $23,680 $35,520 31/12/2015 $35,520 $14,208 $21,312 ACCUMULATED DEPRECIATION $52,688 UNITRY METHOD COST PRICE $1,033,80 SALVAGE VALUE $7,680 TOTAL MACHINE HOUR EXPECTED 33000 MACHINE HOUR RATE 2.9 DATE RATE PER HOUR WORKING HOUR DEPRECIATION 31/12/2013 2.9 760 2204 31/12/2014 2.9 6140 17806 31/12/2015 2.9 7410 21489 ACCUMULATED DEPRECIATION 41499

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