The Jason Knife Co. purchased a machine on August 1, 2011. The machine cost $495
ID: 2458924 • Letter: T
Question
The Jason Knife Co. purchased a machine on August 1, 2011. The machine cost $495,000. It had anestimated life of ten years, 25,000 units, or 20,000 hours and an estimated residual value of $45,000. In 2011 Jasonproduced 3,000 units and ran the machine for 850 hours. In 2012, Jason produced 4,000 units and ran the machine for 1,800 hours.
Compute the depreciation charge for 2011 & 2012 using each of the following methods:
a.double declining balance:
b.units of output:
c.sum of the years' digits:
d.straight line:
SHOW WORK!
Explanation / Answer
a)
Double declining depreciation = 2*(asset cost- salvage value)/life
=2* ( 495000- 45000) /10 = 90000
double declining depreciation for year 2011 = 90000
double declining depreciation for year 2012 = 72000
b)
depreciation as per unit of production method = units produced/total units * (asset cost- salvage value)
For year 2011= 3000/25000 * (495000 - 45000)
= 54000
For year 2012 = 4000/25000 * (495000 - 45000)
= 72000
C)
depreciation as per number of hours method = hours produced/total hours * (asset cost- salvage value)
For year 2011= 850/20000 * (495000 - 45000)
= 19125
For year 2012 = 1800/20000 * (495000 - 45000)
= 40500
d)
SLM Depreciation = asset cost - salvage value / life
= 495000 - 45000 / 10 = 45000
depreciation expense for year 2011 = 45000
depreciation expense for year 2012 = 45000
e) Sum of year digit
Depreciation for 2011 = digit * sum * (asset cost - salvage value)
= 10 / 55 * (495000 - 45000)
= 81818
Depreciation for 2012 = digit * sum * (asset cost - salvage value)
= 9 / 55 * (495000 - 45000)
= 73636
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