Question

Problem 9-3A a-b Sheridan Limited purchased a machine on account on April 2, 2018, at an invoice price of $369,950. On April 4, it paid $1,900 for delivery of the machine. A one-year, $3,760 insurance policy on the machine was purchased on April 5. On April 18, Sheridan paid $7,790 for installation and testing of the machine. The machine was ready for use on April 30. Sheridan estimates the machine's useful life will be five years or 6,141 units with a residual value of $78,470. Assume the machine produces the following numbers of units each year: 900 units in 2018; 1,537 units in 2019; 1,495 units in 2020; 1,174 units in 2021; and 1,035 units in 2022. Sheridan has a December 31 year end. Determine the cost of the machine. Cost of the machine

Answer 1

Computation of Cost of Machinery
Invoice Price	$369,950.00
Delivery Expense	$1,900.00
Installation and testing	$7,790.00
Cost of Machienry	$379,640.00

Straight-Line Depreciation Schedule
		Depreciation for the Year
	Asset	Depreciable		Useful Life		Depreciation	Accumulated	Book
year	Cost	Cost				Expense	Depreciation	Value
2018	$379,640.00
2018		$301,170.00		5		$40,156.00	$40,156.00	$339,484.00
						(301170/5*8/12)
2019		$301,170.00	/	5	=	$60,234.00	$100,390.00	$279,250.00
2020		$301,170.00	/	5	=	$60,234.00	$160,624.00	$219,016.00
2021		$301,170.00	/	5	=	$60,234.00	$220,858.00	$158,782.00
2022		$301,170.00	/	5	=	$60,234.00	$281,092.00	$98,548.00
2023		$301,170.00	/	5	=	$20,078.00	$301,170.00	$78,470.00
						(301170/5*4/12)
Depreciable cost =379640-78470=$301170

Depreciation per Unit = (Original Cost- Salvage Value)/ Estimated Unit

=(379640-78470)/6141 Unit=$49.0425

Units-of-Production Depreciation Schedule
		Depreciation for the Year
	Asset	Depreciation		Number of		Depreciation	Accumulated	Book
Date	Cost	Per Unit		Unit		Expense	Depreciation	Value
2018	$379,640
2018		49.0425	x	900	=	$44,138	$44,138	$335,501.75
2019		49.0425	x	1537	=	$75,378	$119,517	$260,123.43
2020		49.0425	x	1495	=	$73,319	$192,835	$186,804.89
2021		49.0425	x	1174	=	$57,576	$250,411	$129,229.00
2022		49.0425	x	1035	=	$50,759	$301,170	$78,470.01

Double-Declining-Balance Depreciation Schedule
		Depreciation for the Year
	Asset	Book		DDB (1/5)		Depreciation	Accumulated	Book
Date	Cost	Value		Rate		Expense	Depreciation	Value
2018	$379,640.00
2018		$379,640.00	X	20%		$50,618.67	$50,618.67	$329,021.33
						(379640*20%*8/12)
2019		$329,021.33	X	20%		$65,804.27	$116,422.93	$263,217.07
2020		$263,217.07	X	20%		$52,643.41	$169,066.35	$210,573.65
2021		$210,573.65	X	20%		$42,114.73	$211,181.08	$168,458.92
2022		$168,458.92	X	20%		$33,691.78	$244,872.86	$134,767.14
2023		$134,767.14	X	20%		$56,297	$301,170.00	$78,470.00
						(134767.14-78470)