Rottine Company purchased a new machine on October 1, 2015, at a cost of $150,00

Question

Rottine Company purchased a new machine on October 1, 2015, at a cost of $150,000. for 10,000 working hours during its 5-year life. Compute the depreciation expense under straight-line method for 2015. (Round answer to 0 decimal places, e.g. 2,125.) Compute the depreciation expense under units-of-activity for 2015, assuming machine usage was 1,700 hours. (Round per hour value to 2 decimal places, e.g. 21.25 and final answer to 0decimal places, e.g. 2,125.) Compute the depreciation expense under declining-balance using double the straight-line rate for 2015 and 2016. (Round answers to 0 decimal places, e.g. 2,125.)

Explanation / Answer

Answers

Depriciation as per SLM = $27600
Depriciation as per unit of activity method = $23460
Depriciation as per declining balance for 2015 = $55200
Depriciation as per declining balance for 2016 = $34886.40

check below for detailed solution

Original cost = $150000

salvage value = $12000

Life = 5 years
working hours = 10000 hours

depriciation as per Straight line method also called as fixed installment method

= original cost - salvage value / life = $150000-$12000/ 5 = $27600

Rate of depriciation will be Depriciation amount/ original cost*100 = $27600/$150000*100 = 18.4%


now depriciation as per unit of activity method

= (original cost - salvage value)* used in 2015 / total hours of life = ($150000-$12000)*1700/10000 = $ 23460

Now depriciation will be as per WDV or diminishing value method will be the double the rate of SLM = 18.4%*2 = 36.8%

so depriciation for the year 2015= $150000*36.8% = $55200

and depriciation for the year 2016 = ($150000-$55200)*36.8% = $34886.4

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