The Jason Knife Co. purchased a machine on August 1, 2011. The machine cost $495

Question

The Jason Knife Co. purchased a machine on August 1, 2011. The machine cost $495,000. It had anestimated life of ten years, 25,000 units, or 20,000 hours and an estimated residual value of $45,000. In 2011 Jasonproduced 3,000 units and ran the machine for 850 hours. In 2012, Jason produced 4,000 units and ran the machine for 1,800 hours.

Compute the depreciation charge for 2011 & 2012 using each of the following methods:

a.double declining balance:

b.units of output:

c.sum of the years' digits:

d.straight line:

SHOW WORK!

Explanation / Answer

Calculation of the depreciation Cost- Residual Value 495000-45000 450000 Straight Line Method Depreciation per year 450000/10= $ 45000 per year 2011 45000*5/12 18750 2012 45000 Units of Output Depreciation per unit = 450000/25000 18 2011 3000*18 54000 2012 4000*18 72000 Per Hour 450000/20000 22.5 2011 850*22.5 19125 2012 1800*22.5 40500

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