Sunland Corporation purchased a new machine for its assembly process on August 1
ID: 2530547 • Letter: S
Question
Sunland Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $174,492. The company estimated that the machine would have a salvage value of $19,092 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.)
Explanation / Answer
(a) Straight-line depreciation for 2017
Depreciation = (Cost of the assets – Salvage Value ) / Usefull Life
= [ ($174492 - $19092) / 5 ] x 5/12
= $31080 x 5/12
= $12,950
(b) Activity method for 2017, assuming that machine usage was 840 hours
Depreciation rate per hour = [ ($174492 - $19092) ] / 21200 Hours
= $7.33 per hour
Depreciation = 840 Hours x $7.33 per hour
= $6,157
(c) Sum-of-the-years'-digits for 2018
Depreciation = [ ($174492 - $19092) ] x 9/55
= $25,429
(d) Double-declining-balance for 2018
Depreciation for 2017 = $174492 x 2 x 1/5 x 5/12
= $29,082
Depreciation for 2018 = ( $174492 - $29082 ) x 2 x 1/5
= $58,164
**** 5/12 fraction is used because the Machine was purchased on August1,2017 and the Depreciation shall be charged based on the proportionate months used
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.