Sunland Corporation purchased a new machine for its assembly process on August 1
ID: 2530548 • 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 Method Cost of Assets $ 174,492.00 Salvage Value $ 19,092.00 Estimated Useful life 5 Years Formula=(Cost-Salvage Value)/Expected useful life Depreciation Amount $ 31,080.00 Straight line depreciation for 5 months(From August to December)=($31080*5/12) $ 12,950.00 (b ) Unit of Activity Method The machine can operate 21200 Hours Activity Method=($174492-$19092)/21200 7.33 Depreciation under unit of Activity method= 840 hours*7.33= 6157.2 C ) sum of Years digit= n(n+1)/2=5*(5+1)/2=30/2=15 Year Total Allocated to 2017 2018 1 (174492-19092)*5/15=$51800 51800*5/12=$21583.33 30216.67 (For 7 months) 2 (174492-19092)*4/15=$41440 41440*5/12=$17266.67 (For 5 months) Total 0.00 47483.34 d) Double Declining Rate=1/5*200%= 40% Year 1 (174492*40%)*5/12=$29082 Year 2 (174492-29082)*40%=$58164 Depreciation Expense Straight line dep for 2017 $ 12,950.00 Activity method for 2017 $ 6,157.20 Sum of years digit method 2018 $ 47,483.34 Double Declining Method 2018 $ 58,164.00
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