Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,580

Question

Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,580. The company estimated that the machine has a salvage value of $7,290. The machine is expected to be used for 65,530 working hours during its 8-year life.

Compute depreciation using the following methods in the year indicated.

(a)

Declining-balance using double the straight-line rate for 2014 and 2015.

Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,580. The company estimated that the machine has a salvage value of $7,290. The machine is expected to be used for 65,530 working hours during its 8-year life.

Compute depreciation using the following methods in the year indicated.

Explanation / Answer

Straight line rate = 1 /useful life

                               = 1/ 8

                                = .125

Declining rate = .125 *2 = .25 or 25%

year Book value at beginning (A) Rate Depreciation (B)   =[A*Rate] Accumulated depreciation Book value at end (A-B) 2014 90580 25*3/12 = 6.25% 5661.25 5661.25 84918.75 2015 84918.75 25% 21229.69 26890.94   [5661.25+21229.69] 63689.06

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