Stellar Corp. purchased machinery for $384,300 on May 1, 2017. It is estimated t

Question

Stellar Corp. purchased machinery for $384,300 on May 1, 2017. It is estimated that it will have a useful life of 10 years, salvage value of $18,300, production of 292,800 units, and working hours of 25,000. During 2018, Stellar Corp. uses the machinery for 2,650 hours, and the machinery produces 31,110 units.

From the information given, compute the depreciation charge for 2018 under each of the following methods. (Round intermediate calculations to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 45,892.)

(a) Straight-line $

(b) Units-of-output $

(c) Working hours $

(d) Sum-of-the-years'-digits $

(e) Declining-balance (use 20% as the annual rate) $

Explanation / Answer

From the information given, compute the depreciation charge for 2018 under each of the following methods

a) Straight line dep for 2018 = (384300-18300)/10 = 36600

b) Unit of output :

Dep rate = (384300-18300)/292800 = 1.25 per unit

Depreciation for 2018 = 1.25*31110 = 38887.50

c) working hours :

Dep rate = (384300-18300)/25000 = 14.64 per hour

Depreciation for 2018 = 14.64*2650 = 38796

d) SUm of year digit :

Sum of year digit = 10+9+8+7+6+5+4+3+2+1 = 55

depreciable base = 384300-18300 = 366000

2018 dep = 366000*10/55*4/12+366000*9/55*8/12 = 62109

e) Declining balance :

dep 2018 = 384300*20%*4/12+384300*80%*20%*8/12 = 66612

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