Question

Oriole Ltd. purchased a new machine on April 4, 2014, at a cost of $180,000. The company estimated that the machine would have a residual value of $18,000. The machine is expected to be used for 9,000 working hours during its four-year life. Actual machine usage was 1,300 hours in 2014; 2,000 hours in 2015; 2,100 hours in 2016; 1,900 hours in 2017; and 1,700 hours in 2018. Oriole has a December 31 year end.

Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, e.g. 2.75 and final answers to 0 decimal places, eg. 5,275.) (1) Straight-line for 2014 through to 2018. 2014 expenses 2015 expense $ 2016 expense $ 2017 expense $ 2018 expense $

Answer 1

ANSWERS 1)straight line 2014 expense 2015 expense 2016 expense 2017 expense 2018 expense 30375 40500 40500 40500 10125 2)Diminishing balance method 2014 expense 67500 2015 expense 56250 2016 expense 28125 2017 expense 5063 2018 expense 5063 3)units of production method 2014 expense 2015 expense 2016 expense 2017 expense 2018 expense 23400 36000 37800 34200 30600

1)explanation straight line method explanation equipment 1,80,000 residual value 18,000 life straight line depreciation =( asset cost - residual value) /life 40500 years

year 2014 2015 2016 2017 2018 2 double declining depreciation %= 200%/4 50% asset book value at depreciation accumulated beginning dep 1,80,000 67500 67500 1,12,500 56250 123750 56,250 28,125 151875 28,125 5,063 156938 23,063 5,063 162000 book value ending 1,12,500 56,250 28,125 23,063 18,000

3).units of activity method equipment scrap value projected hours depreciationcost per hour =(asset cost-scrap)/total production hours 1,80,000 18,000 9000 18.00 year 2014 2015 2016 2017 units 1300 2000 2,100 1,900 1700 rate 18.00 18.00 18.00 18.00 18.00 depreciation 23400 36000 37800 34200 30600 2018

for double declining balance method ,depreciation for last two years is calculated on the basis of straight line method ,because book value is lower than the residual value (please use comment box if required any further clarification )