In recent years, Mario Company purchased three machines. Because of heavy turnov

Question

In recent years, Mario Company purchased three machines. Because of heavy

turnover in the accounting department, a different accountant was in charge of selecting

the depreciation method for each machine, and each selected a different method.

Information concerning the machines is summarized below.

                                                             Salvage           Useful Life             Depreciation

Machine              Acquired Cost          Value               in Years                 Method

1. 1/1/11              $125,000               $ 25,000              10                          Straight-line

2. 1/1/12               140,000                   20,000             10                          Declining-balance

3. 11/1/14             100,000                  13,000                 6                          Units-of-activity

For the declining-balance method, the company uses the double-declining rate. For the

units-of-activity method, total machine hours are expected to be 30,000. Actual hours of

use in the first 3 years were: 2014, 3,000; 2015, 5,500; and 2016, 4,500.

Instructions

(a) Compute the amount of accumulated depreciation on each machine at December 31,

2014.

(b) If machine 2 had been purchased on March 1 instead of January 1, what would be the

depreciation expense for this machine in (1) 2012 and (2) 2013?

Explanation / Answer

1 Straight Line Depreciation Depreciation per year Cost - Salvage/ Life (125000-25000)10 10000 per year 31-Dec Accumulated Depreciation on December 31, 2014 10000*4 = $ 40000 3 Unit Rate 100000-11000/0000 2.966667 Depreciation 2014 2.966667*3000 8900.001 The depreciation would be $ 8900

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