Shamrock Corporation purchased a new machine for its assembly process on August
ID: 2555370 • Letter: S
Question
Shamrock Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $139,122. The company estimated that the machine would have a salvage value of $15,222 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 19,800 hours. Year-end is December 31.
Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.)
Explanation / Answer
1.Depreciation Under Stright Line Method
Depreciation for 2017 = ( Cost of the Machine – Salvage Value )/Usefull Life
= [ ( $ 1,39,122 - $ 15,222 ) /5 Years] * 5/12
= $ 10,325
2. Depreciation Using Activity Method
Depreciation for 2017 = [(Cost of Machine – Salvage Value) /Total Hours] x Actual Hours
= $ 1,23,900 x 830 Hours / 19800 Hours
= $ 5,194
3.Depreciation Using sum of years digit method
Depreciation for 2018 = $ 123900 x 4/15
= $ 33,040
4.Depreciation for 2018 Using Double Declining Balance
Depreciation for 2018 = $ 46,374
Year
Book Value Begining
Double Declining Depreciation = 2 x SL Depreciation Rate x Book Value Begining
Net Book Value End
2017
$ 139122
$ 23,187
$ 115935
2018
$ 115935
46374
69561
***Stright Line Depreciation Rate = 1/5 = 20%
**$ 139122 x 2 x 20% x 5/12 = $ 23,187
Year
Book Value Begining
Double Declining Depreciation = 2 x SL Depreciation Rate x Book Value Begining
Net Book Value End
2017
$ 139122
$ 23,187
$ 115935
2018
$ 115935
46374
69561
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