The cost of equipment purchased by Concord, Inc., on June 1, 2017, is $97,900. I

Question

The cost of equipment purchased by Concord, Inc., on June 1, 2017, is $97,900. It is estimated that the machine will have a $5,500 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 46,200, and its total production is estimated at 577,500 units. During 2017, the machine was operated 6,600 hours and produced 60,500 units. During 2018, the machine was operated 6,050 hours and produced 52,800 units.

Compute depreciation expense on the machine for the year ending December 31, 2017, and the year ending December 31, 2018, using the following methods. (Round depreciation per unit to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 45,892.)

2017

2018

2017

2018

(a) Straight-line $

$

(b) Units-of-output $

$

(c) Working hours $

$

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

$

(e) Double-declining-balance (twice the straight-line rate) $

$

Explanation / Answer

Compute depreciation expense on the machine for the year ending December 31, 2017, and the year ending December 31, 2018, using the following methods.

2017

2018

Sum of year digit = 7+6+5+4+3+2+1=28

Depreciable base = 97900-5500=92400

Straight line rate = 100/7=14.29%

Double decline rate = 14.29*2=28.57%

2017

2018

(a) Straight-line (97900-5500/7)*7/12=7700 (97900-5500/7) = 13200 (b) Units-of-output (97900-5500/577500)*60500=9680 (97900-5500/577500)*52800=8448 (c) Working hours (97900-5500/46200)*6600=13200 (97900-5500/46200)*6050=12100 (d) Sum-of-the-years'-digits (92400*7/28*7/12)=13475 (92400*7/28*5/12+92400*6/28*7/12)=21175 (e) Double-declining-balance (twice the straight-line rate) (97900*28.57%*7/12)=16317 (92400*28.57%*5/12+92400*71.43%*28.57%*7/12)=22655

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