Question

28. The company estimated that Pharoah Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $ 155,628. The company estimated that the machine would have a salvage value of $17,028 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 19,800 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.) (a) Straight-line depreciation for 2017 (b) Activity method for 2017, assuming that machine usage was 780 hours पी (c) Sum-of-the-years'-digits for 2018 पी (d) Double-declining-balance for 2018 पी

Answer 1

a) Straight line Depreciation for 2017 = (155628-17028)/5*5/12 = 11550

b) Activity method = (155628-17028/19800)*780 = 5460

c) Sum of year digit = 138600*5/15*7/12+138600*4/15*5/12 = 42350

d) Double declining balance = 155628*40%*7/12+155628*60%*40%*5/12 = 51876