Exercise 9-20 Cullumber Company purchased a new machine on October 1, 2017, at a

ID: 2549210 • Letter: E

Question

Exercise 9-20 Cullumber Company purchased a new machine on October 1, 2017, at a cost of $92,300. The company estimated that the machine has a salvage value of $7,700. The machine is expected to be used for 68,700 working hours during its 8-year life. Compute depreciation using the following methods in the year indicated Declining-balance using double the straight-line rate for 2017 and 2018. (Round answers to O decimal places, e.g. 125) 2018 Depreciation using the Declining-balance methods LINK TO TEXT VIDEO: APPLIED SKILLS VIDEO: SIMILAR EXERCISE Calculate the depreciation cost per hour. (Round answer to 2 decimal places, e.g. $1.25) Depreciation cost per hour Units-of-activity for 2017, assuming machine usage was 460 hours. (Round answer to 0 decimal places, e.g. 125) Depreciation using the Units-of-activity method for 2017s LINK TO TEXT VIDEO: APPLIED SKILLSVIDEO: SIMILAR EXERCISE

Explanation / Answer

Answer

Cost

92300

(-) Salvage Value

7700

Depreciable base

$84600

Life [in years]

C=A/B

Annual [12 months] Straight Line Depreciation

$10575

D=C/A

SLM % rate

13%

E=D x 2

Double declining rate %

25%

Beginning Value

Depreciation rate

Annual Depreciation

Current Year Depreciation

Ending Book Value

2017

$92300

25%

$23075

[23075 x 3months/12months] $5769

$86531

2018

$86531

25%

$21633

$64898

2017

2018

Depreciation using Declining Balance Method

$5,769

$21,633

Depreciable base

$84600

Expected working hours

68700 hours

C=A/B

Depreciation cost per hour

$1.23 per hour

Machine usage [hours]

460 hours

Depreciation cost per hour

$1.23 per hour

Depreciation using the Units of Activity method for 2017 [460 x 1.23]

$566