In recent years, Farr Company has purchased three machines. Because of frequent
ID: 2500070 • Letter: I
Question
In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.
Machine Acquired Cost SalvageValue Useful Life(in years) Depreciation
Method
1 Jan. 1, 2012 $138,000 $53,200 8 Straight-line
2 July 1, 2013 94,000 10,700 5 Declining-balance
3 Nov. 1, 2013 107,920 7,120 7 Units-of-activity
For the declining-balance method, Farr Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 36,000. Actual hours of use in the first 3 years were: 2013, 700; 2014, 5,240; and 2015, 6,750.
1. Compute the amount of accumulated depreciation on each machine at December 31, 2015.
2. If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2013? In 2014?
Please show work so I can have a better understanding. Thanks
Explanation / Answer
Calculation of the accumulated depreciation as on December 31, 2015 Machine 1 Dep = Cost - Salvage/ Life = 138000-53200/8 10600 Dep for 4 years 10600*4 Accumulated Depreciation 42400 Machine 2 Depreciation Rate = 94000-10700/5 16660 Depreciation Rate = 16660/94000 17.80% 35.60% 94000*35.6%*4 133856 Accumulated Depreciation 0 Machine 3 Dep = 107920-7120 Total Hours 700+5240+6750 12690 Accumulated Dep (107920-7120)*12690/36000 35532
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.