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. Calculate the depreciation cost per hour. Units-of-activity for 2014, assuming machine usage was 3,960 hours. Depreciation using the Units-of-activity method for 2014

Explanation / Answer

b)Depreciation cost per hour = (cost -salvage) /estimated hours

                                        = (90060-7800)/64430

                                        = 82260 / 64430

                                        = $ 1.28 per hour

2014 Depreciation = 3960 * 1.28 = $ 5069

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