Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,340

Question

Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,340. The company estimated that the machine has a salvage value of $8,690. The machine is expected to be used for 65,170 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 2014 and 2015. (Round answers to 0 decimal places, e.g. 125

2014

2015

$

2014

2015

$

$

Explanation / Answer

Purchase price 90,340

Salvage value 8,690

Useful life (years) 8

Straight line depreciation = (90,340 - 8,690) / 8 = 10,206 per year

straight-line rate=10206/81650*100=12%

Declining-balance using double the straight-line rate=12*2=24%

Original cost $90,340
2014 depreciation $5,420 ($90,340 x24% x 3/12)
Book value at end 2014 $84,920
2015 depreciation $20,380 ($84,920 x 24%)
Book value at end 2015 $64,540

depreciation expense
2014 $5,420
2015 $20,380

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