Question

In recent years, Crane 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
1		Jan. 1, 2015		$130,500		$30,500		10		Straight-line
2		July 1, 2016		88,000		10,100		5		Declining-balance
3		Nov. 1, 2016		76,100		9,100		6		Units-of-activity

For the declining-balance method, Crane Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 33,500. Actual hours of use in the first 3 years were: 2016, 660; 2017, 5,700; and 2018, 7,300.

- Your answer is incorrect. Compute the amount of accumulated depreciation on each machine at December 31, 2018. MACHINE 1 MACHINE 2 MACHINE 3 Accumulated Depreciation at December 31 e Textbook and Media * Your answer is incorrect. If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2016? In 2017? 2016 2017 Depreciation Expense $

Answer 1

	MACHINE 1	MACHINE 2	MACHINE 3
Accumulated depreciation at December 31	$40,000	$62,656	$27,320

Working notes:

Machine 1:
Cost (a)	Salvage Value (b)	Depreciable Value (c = a-b)	Useful life (in years) (d)	Depreciation Expense (c/d)
$130,500	$30,500	$100,000	10	$10,000

Depreciation expense for each year under straight line method is same.

Years	Depreciation Expense	Accumulated Depreciation
2015	$10,000	$10,000
2016	$10,000	$20,000
2017	$10,000	$30,000
2018	$10,000	$40,000

Machine 2:

Depreciation under double-declining balance method for 2016 (6 months) = Cost of the asset / number of years *2 * 6/12 months

= $88,000 / 5 years * 2 * 6/12

= $17,600

Depreciation under double-declining balance method for 2017 = Balance / number of years * 2

= ($88,000 - $17,600) / 5 years * 2

= $28,160

Depreciation under double-declining balance method for 2018 = Balance / number of years * 2

= ($88,000 - $17,600 - $28,160) / 5 years * 2

= $16,896

Years	Depreciation Expense	Accumulated Depreciation
2016	$17,600	$17,600
2017	$28,160	$45,760
2018	$16,896	$62,656

Machine 3:

Depreciation cost per machine hour = (Cost of Asset - Salvage value) / Total estimated number of machine hours

= ($76,100 - $9,100) / 33,500 machine hours

= $2 per machine hour

Depreciation expense in 2016 = Depreciation cost per machine hour * machine hours used

= $2 per machine hour * 660 machine hours

= $1,320

Depreciation expense in 2017 = Depreciation cost per machine hour * machine hours used

= $2 per machine hour * 5,700 machine hours

= $11,400

Depreciation expense in 2018 = Depreciation cost per machine hour * machine hours used

= $2 per machine hour * 7,300 machine hours

= $14,600

Years	Depreciation Expense	Accumulated Depreciation
2016	$1,320	$1,320
2017	$11,400	$12,720
2018	$14,600	$27,320

------------------------------------------------------------------------------------------------------------------------------------------------

	2016	2017
Depreciation expense	$26,400	$25,440

Working notes:

Machine 2:

Depreciation under double-declining balance method for 2016 (9 months) = Cost of the asset / number of years *2 * 9/12 months

= $88,000 / 5 years * 2 * 9/12

= $26,400

Depreciation under double-declining balance method for 2017 = Balance / number of years * 2

= ($88,000 - $24,400) / 5 years * 2

= $25,440

Answer 2

Above the answer for part B is incorrect. 
Part B:
2017
(88000-26400) / 5 * 2
24640