Problem 9-7A (Part Level Submission) In recent years, Farr Company has purchased

Question

Problem 9-7A (Part Level Submission) In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. For the declining-balance method, Farr Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 31,000. Actual hours of use in the first 3 years were: Compute the amount of accumulated depreciation on each machine at December 31, 2015.

Explanation / Answer

Machine 2 = Company uses double declining rate i.e [(74000/5)*2]*100/74000 = 40% but asset was purchased on 1st July, 2013 therefore used only for half year in 2013 therefore rate for 2013 = 40/2 = 20%

Therefore accumulated depreciation till 2015 = $52688

Machine 3

Expected hours = 31000 machine hours

Actual hours till 2015 = 670+5030+6710 = 12410 hours

Accumulated depreciation till 2015 = (90630-6930)*12410/31000 = $33507

Year
Book Value
Year Start Depreciation
Percent Depreciation
Expense Accumulated
Depreciation Book Value
Year End 2013 $74,000 20.00% $14,800 $14,800 $59,200 2014 $59,200 40.00% $23,680 $38,480 $35,520 2015 $35,520 40.00% $14,208 $52,688 $21,312 2016 $21,312 40.00% $8,525 $61,213 $12,787 2017 $12,787 6.94% $887 $62,100 $11,900

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