psledugen weypes.comedugen/stadent/maiun n Assignment Exercise 11-5 buttaio Corp
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psledugen weypes.comedugen/stadent/maiun n Assignment Exercise 11-5 buttaio Corporation purchased a new machine for its assembly process on Aupust 1, 2017. The cost of this machine was $127,332.The company estimated that the machine would have a salvage value of $13,932 at the end of its service life. Its life is estimated at 5 yeers, and its working hours are estimated at 19,800 hours Compute the depreciation expense under the flowing methods. Each of the foilowing shouild be considered unresabed (Round depreciation rate per hour to decimal places,e.g. S.35 for computational purpeses. Round your answers te O decimal places,9 43,92) (a) Straight-ine depreciation for 2017 (b) Activity method for 2017, assuming that machine usage was 870 hours (c) Sum-of-the years-digits for 203 (a) Double-declining-balance for 2018 Click if you would ike to Show Work fer this question n Show by accessing bis Quesion Assistance yuee you am points besied on the Pount Potenbal Policy set by your instructor ! se-Nur" Question Attemets:of med se6 alt gExplanation / Answer
Depreciaation is the processs o aallocation and not valuation. It is the reduction in the value of asset due to wear and tear and passage of time. Depreciations are non-cash expense.
1. Straight line depreciation for 2017 = 9,450
Depreciation = Cost of asset - Salvage value / Useful life in years
= 1,27,332 - 13,932 / 5
= 22,680 per yr.
Depreciation for Aug 1 to Dec 31 for 5 months
22,680 x 5/12 = 9,450
2. Activity method for 2017 assuming that machine usage was 870 hours
= 1,27,332 - 13,932 / 19,800hrs = 5.73 hrs
Deprciation for 2017 = 870 x 5.73hr = 4,985
3. Sum of the year digits for 2018 = 34,650
Machine year Total 2017 2018
1 5/15x 113400 = 37800 15750 22050
2 4/15 x 13400 = 30250 12600
15750 34650
4. Double declining balance for 2018 = 42,444
Rate of depreciation = 1 / estimated life
= 1 / 5 = 0.2 = 20%
Declining balance rate = 20 x 2 = 40%
2017 40% x (1, 27,332) x 5/12 = 21,222
2018 40% x (1,27,332 - 21,222) = 42,444
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