Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,060

Question

Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,060. The company estimated that the machine has a salvage value of $7,800. The machine is expected to be used for 64,430 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. By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.

Explanation / Answer

year Book value depreciation as per double declining Method    net book value

2014 $90060 ($90060 * 2 * 12.5% * 3/12months) = $5629 $ 84431

   2015 $84431 ( $84431 * 2 * 12.5% ) = $ 21108 $ 63323

Note: Double declining method = 2 * straight line rate * book value

straight line rate = 1 / 8years * 100 = 12.5%

  

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