Rottino Company purchased a new machine on October 1, 2017, at a cost of $132,00
ID: 2595386 • Letter: R
Question
Rottino Company purchased a new machine on October 1, 2017, at a cost of $132,000. The company estimated that the machine will have a salvage value of $10,100. The machine is expected to be used for 10,500 working hours during its 4-year life.
2017
2017
2017
2018
Rottino Company purchased a new machine on October 1, 2017, at a cost of $132,000. The company estimated that the machine will have a salvage value of $10,100. The machine is expected to be used for 10,500 working hours during its 4-year life.
Explanation / Answer
Straight Line Method
Depreciation per year = (Cost – Salvage Value) / Useful life
= (132,000 – 10,100) / 4
Depreciation per year = $30,475
As Asset is purchased on 1st Oct and year closes on 31st Dec. so its 3 month depreciation.
2017 = 30,475 * 3/12 months
2017 = $7,618.75
Units of Activity Method
Total Working hours = 10,500 Hours
Depreciable value = Cost – Salvage value
= 132,000-10,100
Depreciable value = 121,900
Depreciation = (Produced in that year/total production) * Depreciable value
2017 = (1610/10,500) hours * 121,900
2017 = $18,691.33
Declining Balance Method
Depreciation rate = 2* Straight line rate
= 2*25%
Depreciation rate = 50%
Depreciation = Rate * Book Value
2017 = 132,000 * 50% * 3/12 months
2017 = 16,500
2018 = (132,000-16,500) * 50%
2018 = $57,750
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