\"P9-8A In recent years, Jayme Company has purchased three machines. Because of

Question

"P9-8A In recent years, Jayme Company has purchased three machines. Because of frequent mployee turnover in the accounting department, a different accountant was in charge of ecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below Salvage Useful Life Machine Acquired Cost Value (in years) Depreciation Method Jan. 1, 2015 $96,000 $12,000 July 1, 2016 85,000 10,000 Nov. 1, 2016 66,000 6,000 Straight-line Declining-balance Units-of-activity For the declining-balance method, Jayme Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 30,000. Actual hours of use in the first 3 years were 2016, 800; 2017, 4,500; and 2018, 6,000. Instructions (a) Compute the amount of accumulated depreciation on each machine at December 31,2018. (b) If machine 2 was purchased on April 1 instead of July 1, what would be the deprecia tion expense for this machine in 2016? In 2017?

Explanation / Answer

Accumulated Deperication on machine -2  Will be $57460.

Part-a a. Statement Showing Accumulated Depreciation as on 31 Dec 2018 Machine Accumalated Depreciation Method 1 $42,000 SLM 2 $60,520 Doble Decline 3 $22,600 Activity Based Statement Showing Depreciation on Machine-3( Activity Based) Year Hour used
(i) Depreiciation rate as per W/N-1 ( 2) Deperication expense
3=(1*2)      Accumulated depericiation 1 800 $2 $1,600 $1,600 2 4500 $2 $9,000 $10,600 3 6000 $2 $12,000 $22,600

W/No-1 Depericiation charges = (Cost of Machine- Salvage Value) Total Estimated Hours = ($66000-$6000) =$2 30000 Hour Showing Depreciation on Machine-1( SLM) Year Depreication Expesne Accumulated depericiation 2015 $10,500 $10,500 2016 $10,500 $21,000 2017 $10,500 $31,500 2018 $10,500 $42,000 Refer Depreciation Expense = (Cost of Machine- Salvage Value) No. of Year Life = ($96000-$12000) 8 Year Showing Accumalted depreciaton at 31 dec 2018 on Machien-2( Double declining Balance) Year Beginning Boook value X Depericaition rate Deperication expense
   Accumulated depericiation Refer 2016 $85,000 0.40 $17,000 $17,000 ($85000*0.40*6/12) 2017 $68,000 0.40 $27,200 $44,200 ($85000-17000)*0.40 2018 $40,800 0.40 $16,320 $60,520 ($85000-$27200)*0.40 Refer Depericiation rate = 1 *2 Total estimated life = 1/(5) *2 = 0.40 Part b - When Machine Purchase in 1 April 2016 Showing Accumalted depreciaton at 31 dec 2018 on Machien-2( Double declining Balance) Year Beginning Boook value X Depericaition rate Deperication expense
   Accumulated depericiation Refer 2016 $85,000 0.40 $8,500 $8,500 ($85000*0.40*3/12) 2017 $76,500 0.40 $30,600 $39,100 ($85000-17000)*0.40 2018 $45,900 0.40 $18,360 $57,460 ($85000-$27200)*0.40

Accumulated Deperication on machine -2  Will be $57460.

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