Teal Corporation purchased a ne machine for its assembly process on August 1 201
ID: 2576556 • Letter: T
Question
Teal Corporation purchased a ne machine for its assembly process on August 1 2017. The cost or this machine was127,332. The company estimated that the machine ould have salvage value of $13 932 at the end of its service life. ts 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 or the rollowing should be oonsidered unrelated Round depreciation ate per hour to 2 decima, Placeo, e g 5.35 for computational Purposes. Round yourens vers to O dec mai place eg 45,892.) (a) Straight-line dapreciatian for 2017 (b) Activity method for 2017, assuming that machine usege was 870 hours s (c) Sum-of-the-years'-digits for 2019 (d) Doubic-ceclining-balance far 2018Explanation / Answer
Original Cost 127,332.00 Salvage Value 13,932.00 Estimated Life 5.00 Working Hours 19,800.00 (a) Straight Line Deprciation Original Cost-Salvage Value/Estimated Life 124,546 (b) Activity Method when machine usage =870 hours (Original Cost-Salvage Value)*Actual Activity perfomed during the period/Total estimated life time activity of asset 4,982.73 c Sum of the year digits for 2018 Year Remaining estimated useful life at beginning fo year SYD % Annual Depreciation(Original Cost-Salvage Value)*SYD% 1 5 33.33% 37,800 2 4 26.67% 30,240 3 3 20.00% 22,680 4 2 13.33% 15,120 5 1 6.67% 7,560 15 113,400 (d)Double Declining Balance for 2018 Staright Line Depreciation rate=SL Rate(1/5) 20% Year Net Book Value(NBV) at beginning of year Depreciation=2x SL Rate x NBV Net Book Value at end of year 1 127,332 50,933 76,399 2 76,399 30,560 45,840 3 45,840 18,336 27,504 4 27,504 11,001 16,502 5 16,502 6,601 9,901
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