Rottino Company purchased a new machine on October 1, 2017, at a cost of $125,00
ID: 2573059 • Letter: R
Question
Rottino Company purchased a new machine on October 1, 2017, at a cost of $125,000. The company estimated that the machine will have a salvage value of $14,900. The machine is expected to be used for 11,400 working hours during its 5-year life.
2017
2017
2017
2018
Rottino Company purchased a new machine on October 1, 2017, at a cost of $125,000. The company estimated that the machine will have a salvage value of $14,900. The machine is expected to be used for 11,400 working hours during its 5-year life.
Explanation / Answer
Req : Dep under SLM Cost of equipment $ 125,000 Salvage cost $ 14,900 Life = 5 yrs Depreciable cost = Cost-Salvage = 125,000 -14900 = 110,100 Annual depreciation = Depreciable cost / life = 110,100 /5 = $ 22,020 Depreciation for 2017 (for three months) = 22020*3/12= $ 5,505 Req : Dep under Units of activity Depreciable cost = 110,100 Estimated units production during life = 11400 hours Depreciation per hour = 110,100 /11400 = $ 9.66 per hour Depreciation for 2017 = 1800 hours@9.66 = 17,388 Req: Double declining method: rate of dep under SLM = 22020/110100 *100 = 20% Rate under Double declining method = 20%*2 = 40% Depreciation in 2017 = Cost *rate of dep *3/12 = 125000*40% *3/12 = $ 12,500 Book value at the end of 2017 = 125000-12500 = 112,500 Depreciation in 2018 = 112,500*40% = $45000
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