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.

(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./

DEPERICATION 2014 FOR 5MONTHS

= [{($281781 - $30831) 5YEAR} / 12] * 5

= $20912.5

B./

DEPERICATION FOR 2014

= [($281781 - $30831) / 21200] * 870

= $10298.42

C./

DEPERICATION FOR 2015

= ($281781 - $30831) * 4/15

= $66920

D./

DOUBLE DECLINNING BALANCE METHOD

STRAIGHT LINE DEPERICATION

= {($281781 - $30831) / 5}

= $50190

DEPERICATION %

= $50190 / ($281781 - $30831)

= 20%

DOUBLE DECLINNING %

= 20% * 2

= 40%

DEPERICATION FOR 2014

= ($281781 * 40%) * 5/12

= $46963.5

BOOK VALUE AT BEGINNING OF YEAR 2

= $281781 - $46963.5

= $234817.5

DEPERICATION FOR 2015

= $234817.5 * 40%

= $93927

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