Machine Acquired Cost Salvage Value Useful Life (in years) Depreciation Method M
ID: 2721981 • Letter: M
Question
Machine
Acquired
Cost
Salvage
Value
Useful Life
(in years)
Depreciation
Method
MACHINE 1
MACHINE 2
MACHINE 3
If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2013? In 2014?
2013
2014
In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.Machine
Acquired
Cost
Salvage
Value
Useful Life
(in years)
Depreciation
Method
For the declining-balance method, Farr Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 32,000. Actual hours of use in the first 3 years were: 2013, 620; 2014, 5,340; and 2015, 7,010.
Explanation / Answer
Particulars
Machine 1
Machine 2
Machine 3
Accumulated Depreciation as on 31-12-15
42800
64792
31128
If machine 2 purchases on april 1
2013
27300
2014
28210
Machine 1
Cost
139000
Year
Dpreciation
Slavagevalue
53400
2012
10700
life in years
8
2013
10700
yearly depreciation (139000-53400)/8
10700
2014
10700
2015
10700
42800
Year
Opening balance
Depreciation 40%
Closing balance
Machine 2
Cost
91000
July13 to June14
91000
36400
54600
Slavagevalue
10900
July14 to June15
54600
21840
32760
life in years
5
July15 to Dec15
32760
6552
26208
Depreciation rate (2* straight line depreciation rate)
64792
((91000-10900)/5)/(91000-10900)*2
40%
Machine 3
Cost
83560
Year
Machine hours
Per hour depreciation
Total depreciation
Slavagevalue
6760
2013
620
2.4
1488
life in years
6
2014
5340
2.4
12816
Total machine hours
32000
2015
7010
2.4
16824
Per hour depreciation
31128
(83560-6760)/32000
2.4
Year
Opening balance
Depreciation 40%
Closing balance
Machine 2
Cost
91000
April13 to Dec113
91000
27300
63700
Slavagevalue
10900
2014
63700
28210
35490
life in years
5
Depreciation rate (2* straight line depreciation rate)
((91000-10900)/5)/(91000-10900)*2
40%
Particulars
Machine 1
Machine 2
Machine 3
Accumulated Depreciation as on 31-12-15
42800
64792
31128
If machine 2 purchases on april 1
2013
27300
2014
28210
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