Question

On January 1, 2014, a machine was purchased for $120,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 6 years. The machine can operate for 200,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2014, 35,000 hrs; 2015, 45,000 hrs; 2016, 55,000 hrs; 2017, 30,000 hrs; 2018, 20,000 hrs; 2019, 15,000 hrs.

(a) Compute the annual depreciation charges over the machine's life assuming a December 31 year-end for each of the following depreciation methods.

(1) Straight-line method

(2) Activity method

(3) Sum-of-the-years'-digits method

(4) Double-declining-balance method

(b) Assume a fiscal year-end of March 31. Compute the annual depreciation charges over the asset's life applying each of the following methods:

(1) Straight-line method

(2) Sum-of-the-years'-digits method

(3) Double-declining-balance method

Answer 1