Question

Question 1 Sheridan United purchased a machine on account on April 2, 2018 at an invoice price of $169,950. On April 4, 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.

Answer 1

Answer:

Cost of Machine = Invoice Price + Delivery Expense + Installation and Testing Charges
Cost of Machine = $369,950 + $1,900 + $7,790
Cost of Machine = $379,640

Double Diminishing Depreciation Rate = 2 * Straight Line Depreciation Rate
Straight Line Depreciation Rate = 1 / Useful Life
Straight Line Depreciation Rate = 1 /5 = 20%
Double Diminishing Depreciation Rate = 2 * 20% = 40%

Accumulated Carrying Year 2018 2019 2020 2021 2022 2023 Opening Carrying Amount 379,640 265,748 159,449 95,669 78,470 78,470 Depreciation Expense 113,892 106,299 63,780 17,200 113,892 220,191 283,971 301,170 301,170 301,170 265,748 159,449 95,669 78,470 78,470 78,470 Depreciation for Year 2018 = $379,640 * 40% * 9/12 = $113,892