Exercise 11-5 Teal Corporation purchased a new machine for its assembly process

Question

Exercise 11-5 Teal Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $127,332. The company estimated that the machine would have a salvage value of $13,932 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 19,800 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.)

Double-declining-balance for 2018

Double-declining-balance for 2018

Explanation / Answer

Compute depreciation :

Sum of the year digit for 2018 :

Sum of year digit = 5+4+3+2+1 = 15

Depreciable base = (127332-13932) = 113400

Depreciation for 2018 = (113400*5/15*7/12+113400*4/15*5/12) = 34650

Double declining balance for 2018 :

Straight line rate = 100/5=20%

Double decline balance rate = 20*2=40%

Depreciation for 2018 = (127332*40%*7/12+127332*60%*40%*5/12) = 42444

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