Question 3) in recent years, Dobbs Company has purchased thrce machines. Because

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Question 3) in recent years, Dobbs Company has purchased thrce machines. Because of a bad employee named Wares in the accounting department, a different accountant was hired to take charge of sclecting the depreciation method for each machine. Information concerning the machines is summarized in the table below. Machine Acquired Cost Salvage Value(in years) $12.000 $10,000 S 6,000 Useful Life Depreciation method Straight-line Jan. 1, 2015 $96,000 Oct. 1, 2016 $85,000 Nov. 1, 2016 $66,000 15 porbs-l 5 Double-Declining Balance 6 Units-of-Activity For the units-of-activity method, total machine hours are expected to be 30,000. Actual hours of use in the first 3 years were: 2016, 800; 2017, 4,500; and 2018, 7,000. Instructions A) Compute the amount of accumulated depreciation on each machine at December 31, 2018. B) If machine 2 was purchased on April 1 instead of October 1, what would be the depreciation expense for this machine in 2016? In 2017?

Explanation / Answer

Req A: Machine-1 Cost of Machine: 96000 Salvage value: 12,000 Depreciable amount 84,000 Life 15 Annual depreciation 5600 Years till Dec 31 2018 4 Accumulated Depreciation Dec31, 2018 22400 Machine-2 Cost of machine 85000 Rate of Depreciation under DDM 40% Depreciation for Year 2016(3 months 8500 Book valu e at end Dec 31 2016 76500 Depreciation for 2017 30600 Book value on Dec31 2017 45900 Depreciation for 2018 18360 Total Acumulated depreciation till Dec31,2018 57460 Machine-3 Cost of Machine 66000 Salvage value 6,000.00 Depreciation value 60,000.00 Life 30,000.00 Hours Depreciation rate per hour 2.00 Total Hours used till Dec31 2018 12300 Hours (800+4500+7000) Accumulated Depreciation till Dec 2018 24,600.00 Req B: Cost of machine 85000 Rate of Depreciation under DDM 40% Depreciation for Year 2016(9months 25500 Book valu e at end Dec 31 2016 59500 Depreciation for 2017 23800 Book value on Dec31 2017 35700 Depreciation for 2018 14280 Depreciation for 2016 25500 Depreciation for 2017 23,800

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