Whispering Corporation purchased a new machine for its assembly process on Augus
ID: 2575894 • Letter: W
Question
Whispering Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $162,702. The company estimated that the machine would have a salvage value of $17,802 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 21,000 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.)
$
(a) Straight-line depreciation for 2017 $ (b) Activity method for 2017, assuming that machine usage was 800 hours $ (c) Sum-of-the-years'-digits for 2018 $ (d) Double-declining-balance for 2018$
Explanation / Answer
Solution A Cost of Machine 162,702 Salvage value 17,802 Depreciable amount 144,900 Usefull life 5 years Straight line depreciation per year =144900/5 28,980 Dep from Aug till Dec =28980*5/12 Dep from Aug till Dec 12,075 Solution B Depreciable amount 144,900 Life 21,000 hours 2017 usage 800 hours 2017 Depreciation =144900*800/21000 5,520 Solution C Year Year count Depreciation factor 2017 1 5 2018 2 4 2019 3 3 2020 4 2 2021 5 1 15 Depreciation for 2018 =4/15 Depreciation =144900*4/15 Depreciation 38,640 Solution D Straight Line depreciation rate for 5 years 20% So double declining method rate 40% Year Opening WDV Depreciation Closing WDV 2017 162,702 65,081 97,621 2018 97,621 39,048 58,573 So Depreciation for 2018 be 39,048
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