Exercise 9-20 (Part Level Submission) Cullumber Company purchased a new machine

Question

Exercise 9-20 (Part Level Submission) 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 ife. Compute depreciation using the following methods in the year indicated. (a) Declining-balance using double the straight-line rate for 2017 and 2018. (Round answers to 0 decimal places, e.g. 125) 2017 2018 Depreciation using the Declining-balance method By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor Attempts: 0 of 3 used SAME FOR LATH (b) The parts of this question must be completed in order. This pert wil be available when you complete the part above. rved. A Division of

Explanation / Answer

Declining balance depreciation is calculated by following formula)

Depreciation = Depreciation rate * Book value of asset

Depreciation rate = Accelerator * straight line rate

Straight line rate = 1/ useful life of asset in years

If asset cost is 92300 and its useful life is 8 years then straight line rate will be = 1/8

= 0.125

After that we need to calculate Depreciation rate which will be = 0.125*2= 0.25

Depreciation for the first year will be,

Depreciation 1st year = 0.25*92300

= 23075

However in 2017 Dep will be charged for one quarter

So Dep Exp for 2017 = 23075/4 = 5768.75

Book value after 2017 = 92300 - 5768.75 = 86531.25

Depreciation exp in 2018 = 86531.25 * .25 = 21632.81

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