On January 1, 2015, a machine was purchased for $108,000. The machine has an est

Question

On January 1, 2015, a machine was purchased for $108,000. The machine has an estimated salvage value of $7,200 and an estimated useful life of 5 years. The machine can operate for 120,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 24,000 hrs; 2016, 30,000 hrs; 2017, 18,000 hrs; 2018, 36,000 hrs; and 2019, 12,000 hrs. Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.) (1) Straight-line Method $ (2) Activity Method Year 2015 $ 2016 $ 2017 $ 2018 $ 2019 $ (3) Sum-of-the-Years'-Digits Method Year 2015 $ 2016 $ 2017 $ 2018 $ 2019 $ (4) Double-Declining-Balance Method Year 2015 $ 2016 $ 2017 $ 2018 $ 2019 $

Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.) Straight-line Method, Sum-of-the-years'-digits method, and Double-declining-balance method for 2015, 2016, 2017, 2018, 2019, 2020

Explanation / Answer

(1) Straight-line Method = (Cost - Salvage ) / Estimated Years of life = (108000 - 7200 ) / 5 = $20160

(2) Activity Method =

(3) Sum-of-the-Years'-Digits Method =

(4) Double-Declining-Balance Method :

year hourly depreciation yearly depreciation calculation Depreciation charge $ 2015 (108000 - 7200) / 120000 = 0.84 per hour hourly depreciation * year's hours = 0.84 * 24000 = 20160 2016 0.84 * 30000 = 25200 2017 0.84 * 18000 = 15120 2018 0.84 * 36000 = 30240 2019 0.84 * 12000 = 10080

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