Robert Parish Corporation purchased a new machine for its assembly process on Au

Question

Robert Parish Corporation purchased a new machine for its assembly process on August 1, 2014. The cost of this machine was $153,270. The company estimated that the machine would have a salvage value of $16,770 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,900 hours. Year-end is December 31.

Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.)

(a) Straight-line depreciation for 2014 $

(b) Activity method for 2014, assuming that machine usage was 850 hours $

(c) Sum-of-the-years'-digits for 2015 $

(d) Double-declining-balance for 2015 $

Explanation / Answer

a. Straight-line depreciation for 2014 = (Cost - Salvage value) / Estimated useful life = $ ( 153,270 - 16,770) / 5 x 5/12 = $ 11,375

b. Activity method depreciation for 2014 = ( Cost - Salvage value ) / Estimated hours of production x Actual hours of production = $ ( 153,270 - 16,770) / 20,900 x 850 = $ 5,551

c. Sum-of-the-years digits method depreciation for 2015 = ( Cost - Salvage value ) x 4/15 = $ 136,500 x 4/15 = $ 36,400

d. Double declining balance depreciation for 2014 = Cost x 100/5 x 200% x 5/12 = $ 153,270 x 40% x 5/12 = $ 25,545

Depreciation expense for 2015 = Written down value x 40% = $ ( 153,270 - 25,545) x 40% = $ 51,090

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