Robert Parish Corporation purchased a new machine for its assembly process on Au

Question

Robert Parish Corporation purchased a new machine for its assembly process on August 1, 2014. The cost of this machine was $281,781. The company estimated that the machine would have a salvage value of $30,831 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 21,200 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.)

(a) Straight-line depreciation for 2014

(b) Activity method for 2014, assuming that machine usage was 870 hours

(c) Sum-of-the-years'-digits for 2015

(d) Double-declining-balance for 2015

Explanation / Answer

(a) Straight Line Depreciation = Cost - Salavge Value / useful life

Depreciation = $281781 - $30831 / 5 = $50190

(b) Depreciation = 870 / 21200 * $281781 = $11563.65

(c) Depreciation as per sumof years digit method = Remaining useful life / Sum of years digit * Depreciable Base

= 5 / 5+4+3+2+1 * ($281781 - $30831) = $83650

(d) Rate of depreciation as per double declining method = 2* Straight line method rate = 2 * 100/5 = 40%

Depreciation = 40% * $281781 = $112712.40

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