Rottino Company purchased a new machine on October 1, 2015, at a cost of $112,70
ID: 2451265 • Letter: R
Question
Rottino Company purchased a new machine on October 1, 2015, at a cost of $112,700. The company estimated that the machine will have a salvage value of $14,500. The machine is expected to be used for 11,600 working hours during its 5-year life. Your answer is incorrect. Try again. Compute the depreciation expense under straight-line method for 2015. (Round answer to O decimal places, e.g. 2,125.) Q Your answer is correct. Compute the depreciation expense under units-of-activity for 2015, assuming machine usage was 1,600 hours. (Round per hour value to 2 decimal places, e.g. 21.25 and final answer to 0 decimal places, e.g. 2,125.) Your answer is incorrect. Compute the depreciation expense under declining-balance using double the straight-line rate for 2015 and 2016. (Round answers to O decimal places, e.g. 2,125.)Explanation / Answer
Depreciation Expense under Straight line Method
= (Cost - Salvage value)/ useful life
=(112700-14500)/5 = 19640
Since the Machine was purchased in october , the depreciation will be taken for three months only in 2015 assuming Accounting Year is from 1st January to 31st december
= 19640x3/12 = $4910
Depreciation Under Units of Activity Method
Depreciaiton Expense = (Cost - Salvage Value) x Units of working hour during the year/ Expected total working hours
Depreciation Expense = (112700-14500)x1600/11600 = $13545
Depreciation Under Double Declining Method
= 2 x straight line depreciation rate x book value at the beginning of the year
Straight line Rate = 98200/19640x100 = 20%
Year 1 depreciation Expense
2x20%x112700 =$ 45080
Book Value in Year 2016 = 112700 - 45080 =$ 67620
Depeciaiton Expense in 2016 = 67620x40% =$27048
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