Pearl Corp. purchased machinery for $321,300 on May 1, 2017. It is estimated tha

Question

Pearl Corp. purchased machinery for $321,300 on May 1, 2017. It is estimated that it will have a useful life of 10 years, salvage value of $15,300, production of 244,800 units, and working hours of 25,000. During 2018, Pearl Corp. uses the machinery for 2,650 hours, and the machinery produces 26,010 units.

From the information given, compute the depreciation charge for 2018 under each of the following methods. (Round intermediate calculations to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 45,892.)
(a) Straight-line $

(b) Units-of-output $

(c) Working hours $

(d) Sum-of-the-years'-digits $

(e) Declining-balance (use 20% as the annual rate) $

Explanation / Answer

(a) Straight line method = (cost - salvage) / life = (321300 - 15300 ) / 10 = 30600...........final answer

(b) Units of output method = (cost - salvage) / Total Out put = ( 321300 - 15300) / 244800 units = 1.25 per unit.

Depreciation for 2018 = 26,010 units * 1.25 = 32513 ..............final answer

(c) Working hours method = (cost - salvage) / life in hours =  (321300 - 15300 ) / 25000 = 12.24 per hour

Depreciation for 2018 = 2650 hours * 12.24 per hour = 32436...........final answer

(d) Sum of the years digits method

Cost - salvage = 306000.

Depreciation for 2018 = 306000 * 10/55 * 4/12 + 306000 * 9/55 * 8/12 = 51927..........final answer

(e) Double declining method = ( 321300 - 321300*20%*8/12) * 20%

=   ( 321300 - 42840) * 20% = 55692............final answer

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