The cost of equipment purchased by Buffalo, Inc., on June 1, 2017, is $94,340. I

Question

The cost of equipment purchased by Buffalo, Inc., on June 1, 2017, is $94,340. It is estimated that the machine will have a $5,300 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 44,520, and its total production is estimated at 556,500 units. During 2017, the machine was operated 6,360 hours and produced 58,300 units. During 2018, the machine was operated 5,830 hours and produced 50,880 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.)

Explanation / Answer

Unit of production dep :

Dep rate = (94340-5300)/556500 = 0.16 per unit

2017 dep = (58300*.16)=9328

2018 dep = (50880*.16) = 8141

Working hours method :

Dep rate = (94340-5300)/44520 = 2 per hour

2017 dep = 6360*2 = 12720

2018 dep = 5830*2 = 11660

Straight line dep :

Depreciation per year = (94340-5300/7) = 12720 per year

2017 dep = 12720*7/12 = 7420

2018 dep = 12720

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