Question

Problem 9-3A a-b Crane Limited purchased a machine on account on April 2, 2013, at an invoice price of $366,500. On April 4, it paid $1,980 for delivery of the machine. A one year, 53,940 insurance policy on the machine was purchased on April 5. On April 18, Crane paid $8,420 for installation and testing of the machine. The machine was ready for use on April 30. Crane estimates the machine's useful life will be five years or 6,171 units with a residual value of $72,200. Asume the machine produces the following numbers of units each year: 853 units in 2018; 1,385 units in 2019; 1,366 units in 2020; 1,427 units in 2021 and 1.140 units in 2022 Crane has a December 31 year and Determine the cost of the machine Cost of the machine

Answer 1

Computation of Cost of Machinery
Invoice Price	$366,600.00
Delivery Expense	$1,980.00
Installation and testing	$8,420.00
Cost of Machienry	$377,000.00

Straight-Line Depreciation Schedule
		Depreciation for the Year
	Asset	Depreciable		Useful Life		Depreciation	Accumulated	Book
year	Cost	Cost				Expense	Depreciation	Value
2018	$377,000.00
2018		$304,800.00		5		$40,640.00	$40,640.00	$336,360.00
						(304800/5*8/12)
2019		$304,800.00	/	5	=	$60,960.00	$101,600.00	$275,400.00
2020		$304,800.00	/	5	=	$60,960.00	$162,560.00	$214,440.00
2021		$304,800.00	/	5	=	$60,960.00	$223,520.00	$153,480.00
2022		$304,800.00	/	5	=	$60,960.00	$284,480.00	$92,520.00
2023		$304,800.00	/	5	=	$20,320.00	$304,800.00	$72,200.00
						(304800/5*4/12)
Depreciable cost =377000-72200=$304800

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	$377,000
2018		49.3923	x	853	=	$42,132	$42,132	$334,868.37
2019		49.3923	x	1385	=	$68,408	$110,540	$266,460.03
2020		49.3923	x	1366	=	$67,470	$178,010	$198,990.15
2021		49.3923	x	1427	=	$70,483	$248,493	$128,507.34
2022		49.3923	x	1140	=	$56,307	$304,800	$72,200.12

*

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

=(377000-72200)/6171 Unit=$49.39

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	$377,000.00
2018		$377,000.00	X	20%		$50,266.67	$50,266.67	$326,733.33
						(377000*20%*8/12)
2019		$326,733.33	X	20%		$65,346.67	$115,613.33	$261,386.67
2020		$261,386.67	X	20%		$52,277.33	$167,890.67	$209,109.33
2021		$209,109.33	X	20%		$41,821.87	$209,712.53	$167,287.47
2022		$167,287.47	X	20%		$33,457.49	$243,170.03	$133,829.97
2023		$133,829.97	X	20%		$61,630	$304,800.00	$72,200.00
						(133829.97-72200)

Unit of Production Method