Question

Splish Corp. purchased machinery for $381,600 on May 1, 2020. It is estimated that it will have a useful life of 10 years, salvage value of $18,600, production of 290,400 units, and working hours of 25,000. During 2021, Splish Corp. uses the machinery for 2,650 hours, and the machinery produces 31,620 units. From the information given, compute the depreciation charge for 2021 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 th 36300 (b) Units-of-output 0 39525 (c) Working hours 0 38478 (d) Sum-of-the-years'-digits 0 (e) Declining-balance (use 20% as the annual rate) $ 66144

Answer 1

(a) Straight Line (b) Units-of-Output (c) Working Hours (d) Sum-of-the-years digits (e) Decling balance (use 20% as the annual rate) $36,300 $ 39,525 $38.478 $66,000 $66,144 Working Notes: Machinery Cost = $381,600 Salvage value = $18,600 useful Life = 10 Years Straight Line Depreciation = (Machinery cost - Salvage value)/Useful life = ($381,600-$18.600)/10 = $36,300 (6) Units of Output method Depreciation for 2021 = ($381,600-$18.600)*(31,620/290,400) = $39,525 (c) Working hours method Depreciation for 2021 = ($381,600-$18.600)*(2.650/25,000) = $38,478 (d) Sum of years digits method Sum of digits = 10(10+1)/2 = 55 Depreciation for 2021 = ($381,600-$18.600)*10/55 = $66,000