Wenner Furnace Corp. purchased machinery for $279,000 on May 1, 2010. It is esti

Question

Wenner Furnace Corp. purchased machinery for $279,000 on May 1, 2010. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,000. During 2011 Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.

From the information given, compute the depreciation charge for 2011 under each of the following methods.


(b) Units-of-output. (Round depreciation cost per unit to 2 decimal places, i.e. 12.25 and and final answer to 0 decimal places, i.e. 25,240.)

$

(c) Working hours.

$

(d) Sum-of-the-years'-digits.

$

(e) Declining-balance (use 20% as the annual rate).

$

Explanation / Answer

(b) Units-of-output.

depreciation for the period=(cost-salvage value*production during year/estimated total production)
(279000-15000)*25500/240000=$28050
(c) Working hours.
depreciation for the period=(cost-salvage value*hours used during year/estimated total hours)
(279000-15000)*2650/25000=$27984

(d) Sum-of-the-years'-digits.
10+9+8+7+6+5+4+3+2+1=55
(279000-15000)*(10+9)/55=$91200

(e) Declining-balance (use 20% as the annual rate).
take year as 1 Jan to 31 Dec
so dep for 2010 will be taken for 8 months

Depreciation for 2010=(279000*20%)*8/12=$37200
written down value on 1 jan 2011=279000-37200=$241800
Depreciation for 2010=241800*20%=$48360

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