Exercise 9-20 Crane Company purchased a new machine on October 1, 2017, at a cos

Question

Exercise 9-20 Crane Company purchased a new machine on October 1, 2017, at a cost of $93,700. The company estimated that the machine has a salvage value of $8,600. The machine is expected to be used for 69,700 working hours during its 8-year life Compute depreciation using the following methods in the year indicated Declining-balance using double the straight-line rate for 2017 and 2018. (Round answers to 0 decimal places, e.g. 125) 2017 2018 Depreciation using the Declining-balance method Calculate the depreciation cost per hour. (Round answer to 2 decimal places, e.g. $1.25) Depreciation cost per hour Units-of-activity for 2017, assuming machine usage was 430 hours. (Round answer to 0 decimal places, e.g. 125) Depreciation using the Units-of-activity method for 2017 s Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

a) Straight line rate = 100/8 = 12.5%

Double declining rate = 12.5*2 = 25%

2017 Depreciation = (93700*25%*3/12) = 5856

2018 Depreciation = (93700*25%*9/12+93700*75%*25%*3/12) = 21961

b) Depreciation cost per hour = (93700-8600)/69700 = 1.22 per hour

Depreciation using the units of activity method for 2017 = 430*1.22 = 525

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