Exercise 9-6 Rottino Company purchased a new machine on October 1, 2017, at a co
ID: 2556002 • Letter: E
Question
Exercise 9-6
Rottino Company purchased a new machine on October 1, 2017, at a cost of $110,000. The company estimated that the machine will have a salvage value of $10,000. The machine is expected to be used for 10,000 working hours during its 4-year life.
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Compute the depreciation expense under straight-line method for 2017. (Round answer to 0 decimal places, e.g. 2,125.)
2017
Depreciation expense
$
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Compute the depreciation expense under units-of-activity for 2017, assuming machine usage was 1,500 hours. (Round depreciation cost per unit to 2 decimal places, e.g. 0.50 and depreciation rate to 0 decimal places, e.g. 15%. Round final answer to 2 decimal places, e.g. 2,125.25.)
2017
Depreciation expense
$
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Compute the depreciation expense under declining-balance using double the straight-line rate for 2017 and 2018. (Round answers to 0 decimal places, e.g. 2,125.)
2017
2018
Depreciation expense
$
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$
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Explanation / Answer
Answer:
A. Straight Line for 2017
Straight Line Depreciation
=Cost -salvage value / Life if assets
=110,000-10,000 /4
=100,000/4
=25,000
For Oct to December 2017 deprecation
=25,000*3/12
=$6250
2017 Depreciation expense =$6250
__________________________________________
B. Units of Activity for 2017, assuming machine usage was 1,500 hours
Units of Activity Depreciation
=Cost -salvage value / units produced Life if assets
=110,000-10,000 /10,000
=100,000/10,000
=$10 depreciation per unit
For Oct to December 2017 deprecation
=1500 units x $_10
=1500*10
=15000
Depreciation as per Units of Activity for 2017= $15,000
________________________________________
C. Declining-balance using the double straight line rate for 2017 and 2018
DDB rate
=2 x Straight Line rate
=2 x (100/4)
=2x 25%
=50%
Year
Beginning
Balance
DDB
rate
Depreciation
calculation
Depreciation
expanses
Ending
Book
value
2017
110,000
50%
110,000*50%*3/12
13750
96,250
2018
96,250
50%
96,250*50%
48125
48,125
Year
Depreciation
expanses
2017
13750
2018
48125
Year
Beginning
Balance
DDB
rate
Depreciation
calculation
Depreciation
expanses
Ending
Book
value
2017
110,000
50%
110,000*50%*3/12
13750
96,250
2018
96,250
50%
96,250*50%
48125
48,125
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