Cheetah Copy purchased a new copy machine. The new machine cost $108,000 includi

Question

Cheetah Copy purchased a new copy machine. The new machine cost $108,000 including installation. The company estimates the equipment will have a residual value of $27,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows:

Prepare a depreciation schedule for four years using the activity-based method. (Round your "Depreciation Rate" to 3 decimal places and use this amount in all subsequent calculations.)

Explanation / Answer

Units of Production method Depreciation per Hour = ($108,000 - $27,000) / 8,000 Hours = $10.125 per hour Year Book Value Beginning Operating Hours Depreciation = Operating Hrs X $10.125 Accumulated depreciation Book Value Ending 0                     -                         -                                  -                           -         108,000.00 1    108,000.00          3,000.00                 30,375.00          30,375.00         77,625.00 2      77,625.00          2,000.00                 20,250.00          50,625.00         57,375.00 3      57,375.00          1,600.00                 16,200.00          66,825.00         41,175.00 4      41,175.00          2,400.00                 14,175.00          81,000.00         27,000.00 In Year 4 - Depreciation is limited to $14,175.

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