Exercise 11-6-Internet Explorer https://edugen.wileyplus.com/edugen/shared/assig
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Exercise 11-6-Internet Explorer https://edugen.wileyplus.com/edugen/shared/assignment/test/qprint.uri File Edit View Favorites Tools Help Print by: DEBRA GLASS SP'18 ACCO 211-90/ Chapter 11 uction is4 es,e.g. 5. Exercise 11-6 Sheridan Company purchased equipment for $270,000 on October 1, 2017. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $15,000. Estimated production is 40,800 units and estimated working hours are 19,700. During 2017, Sheridan uses the equipment for 520 hours and the equipment produces 1,000 units. Compute depreciation expense under each of the following methods. Sheridan is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, e.g. 5.35 and final answers to 0 decimal places (a) Straight-line method for 2017 (b) Activity method (units of output) for 2017s (c) Activity method (working hours) for 2017 (d) Sum-of-the-years-digits method for 2019 olitde dandining balance mothod for 201e Ce) Question Attempts: 0 of 3 usedExplanation / Answer
a.
Depreciation is the value of asset used for operation during a period. There are so many methods of calculating depreciation. Since the asset is purchased on October, there would be 3 months left to end the calendar year.
Straight line method = {(Cost – Salvage value) / Useful life year} (3 months / Number of months in a year)
= {($270,000 - $15,000) / 8} × (3 / 12)
= (255,000 / 8) × (1 / 4)
= 31,875 × (1 / 4)
= 7,968.75
= $7,969 (Answer)
b.
Output method = (Cost – Salvage value) × (Output during the year / Total estimated output)
= (270,000 – 15,000) × (1,000 / 40,800)
= 255,000 × (1,000 / 40,800)
= $6.25 × 1,000
= $6,250 (Answer)
c.
Hours method = (Cost – Salvage value) × (Hours during the year / Total estimated hours)
= (270,000 – 15,000) × (520 / 19,700)
= 255,000 × (520 / 19,700)
= $12.94 × 520
= $6,729 (Answer)
d.
Depreciable value = Cost – Salvage value = 270,000 – 15,000 = $255,000.
Since the asset has 8 years of life, Sum of years digits = 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 36; in which the digit 8 is for 2017, digit 7 is for 2018, and digit 6 is for 2019.
Since the asset is purchased on October 2017, 3 month’s depreciation would be charged in 2017 and the remaining 9-month’s depreciation would be charged in 2018; the depreciation of 2018 would be charged in that year for 3 months, and the remaining 9 month’s depreciation would be charged in 2019; therefore, the depreciation of 2019 would be charged in that year for 3 months only.
Depreciation for 2019 = {Depreciable value × (6 / 36) × (3 / 12)} + {Depreciable value × (7 / 36) × (9 / 12)}
= $255,000 × (6 / 36) × (3 / 12) + $255,000 × (7 / 36) × (9 / 12)
= $10,625 + $37, 188
= $47,813
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