Riverbed Company purchased machinery for $168,000 on January 1, 2017. It is esti

Question

Riverbed Company purchased machinery for $168,000 on January 1, 2017. It is estimated that the machinery will have a useful life of 20 years, salvage value of $14,700, production of 76,700 units, and working hours of 43,500. During 2017, the company uses the machinery for 14,355 hours, and the machinery produces 13,806 units. Compute depreciation under the straight-line, units-of-output, working hours, sum-of-the-years’-digits, and double-declining-balance methods. (Round intermediate calculations to 5 decimal places, e.g. 1.56487 and final answers to 0 decimal places, e.g. 5,125.)

Depreciation Straight-line $

Units-of-output $

Working hours $

Sum-of-the-years’-digits $

Double-declining-balance $

Explanation / Answer

Cost of machinery : $ 168,000 Estimated salevage life: 20 years Estimated salvage value : $14700 SLM Annual depreciation = Cost -Salvage value / estimated life    ( 168000 - 14700 ) /20 = $ 7,665 Units of output Depreciation per unit of output = Cost -Salvage value/ total production units ( 168,000-14,700 ) /76700 units = $ 1.999 per unit Units produced : 13,806 units Depreciation for the year = 13806 units@ 1.999 = $ 27,598 Working hours Depreciation per hour = Cost -Salvage / Working life in hours (168,000- 14700) /14355 hours= $ 10.68 hours Hours used: 14,355 hours Depreciation for the year = 14,355 hours@ $ 10.68 per hour = 153,311 Sum of years digit: Sum of digit of Life (20+19+18+17+16+15+14+13+12+11+10+9+8+7+6+5+4+3+2+1) = 210 Depreciation for the year = ( Cost -Salvage value)/Total sum of years *20 (168,000 -14700 ) / 210 *20 = $ 14,600 Double declining method: Annual depreciation as per SLM = $ 7665 Rate of deprciation = Depreciation /Cost *100 ( 7665/ 168000) *100= 4.5625% Now. Depreciation as per Double declining = 2*SLM rate * Book value of asset in the beginning of year 2 * 4.5625% *168,000 = $ 15,330 Depreciation Straight line $7,665 Units of output $27,598 Working hours $153,311 Sum of years digit $14,600 Double decling $15,330

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