Wenner Furnace Corp. purchased machinery for $421,290 on May 1, 2012. It is esti

Question

Wenner Furnace Corp. purchased machinery for $421,290 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $22,650, production of 362,400 units, and working hours of 25,000. During 2013, Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 38,505 units.

From the information given, compute the depreciation charge for 2013 under each of the following methods. (Round answers to 0 decimal places, e.g. $45,892.)

(a)
Straight-line
$ (b)
Units-of-output
$ (c)
Working hours
$ (d)
Sum-of-the-years Wenner Furnace Corp. purchased machinery for $421,290 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $22,650, production of 362,400 units, and working hours of 25,000. During 2013, Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 38,505 units. From the information given, compute the depreciation charge for 2013 under each of the following methods.

Explanation / Answer

No. of years = 10
Depreciable Amount = 421290-22650 = $398640.

A
Depreciation Rate under S.L.M. = 1/10 = 10%
Depreciation = 0.1*398640
= $39864

B
Expected Output = 362400
Produced Outpout = 38505
Depreciation = 38505/362400*398640
= $42356

C
Expected Working Hours = 25000
Actual Working Hours = 2650
Depreciation = 2650/25000*398640
= $42256

D
Total years = 10 + 9 + .. + 1 = 55
Depreciation = 10/55*398640
= $72480

E
The rate under SLM is 10%
Thus, for Double Declining Method it will be 20%
Depreciation = 421290*0.2 = $84258

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