BA In recent years, Jayme Company has purchased three machines. Because of frequ
ID: 2509469 • Letter: B
Question
BA In recent years, Jayme Company has purchased three machines. Because of frequent rmation concerning the machines is summarized in the table below Machine Acquired Cost Value (in years) Depreciation Method urnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Salvage Useful Life Jan. 1, 2015 $96,000 $12,000 2 July 1, 2016 85,000 10,000 Nov 1, 2016 66,000 6,000 Straight-line Declining-balance Units-of-activity the declining-balance units-of method, Jayme Company uses the double-declining rate. For total machine hours are expected to be 30,000. Actual hours method, in the first 3 years were 2016, 800; 2017, 4,500; and 2018, 6,000. eciation on each machine at December 31, 2018 of July 1, what would be the deprecia- theExplanation / Answer
Machine 1
Date of acquisition =Jan 1, 2015
Cost of the machine = 96,000
Salvage value= 12,000
Useful life= 8 years
Depreciation method = Straight-line
Straight-line method = (96,000 – 12,000)/8 = 10,500
Accumulated depreciation by December 31, 2018 = 10,500 x 4 = 42,000
The amount of 10,500 depreciation being charged on each year under straight-line method, because the amount of depreciation remains same in each year.
Machine 2
Date of acquisition =Jul 1, 2016
Cost of the machine = 85,000
Salvage value= 10,000
Useful life= 5 years
Depreciation method = Double declining
Depreciation under straight line method is = 1/5 = 20%
So, double declining balance rate = 40%
Cost of the machine=85,000
Depreciation for 2016 for 6 months= (85,000 x 40% x 6/12)=17,000
Book value at the end of 2016= 68,000
Depreciation for 2017= (68,000 x 40%)= 27,200
Book value at the end of 2017= 40,800
Depreciation for 2018= (40,800 x 40%)= 16,320
Book value at the end of 2018= 24,480
Accumulated depreciation on machine at December 31, 2018 = 17,000+27,200+16320
= 60,520
Machine 3
Date of acquisition =Nov 1, 2016
Cost of the machine = 66,000
Salvage value= 6,000
Useful life= 6 years
Depreciation method = Units of activity
Depreciation per unit = (66,000 – 6,000)/ 30,000hrs = 2 per unit
Depreciation for 2016 = 800 x 2 = 1,600
Depreciation for 2017 = 4,500 x 2 = 9,000
Depreciation for 2018 = 6,000 x 2 = 12,000
Accumulated depreciation at the end of Dec 31, 2018 = 1,600+9,000+12,000 = 22,600
Cost of the machine =85,000
Depreciation for 2016 for 9 months= (85,000 x 40% x 9/12)= 25,500
Book value at the end of 2016= 59,500
Depreciation for 2017= (59,500 x 40%)= 23,800
Book value at the end of 2017= 35,700
Depreciation expense for2016 : 25,500
2017: 23,800
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