Question

CALCULATOR PRINTER VERSION « BACK NEXT Exercise 9-24 Gotham Company purchased a new machine on October 1, 2022, at a cost of $90,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 70,000 working hours during its 8-year life. Compute depreciation using the following methods in the year indicated. Declining-balance using double the straight-line rate for 2022 and 2023. 2022 2023 Depreciation using the Declining-balance methods LINK TO TEXT LINK TO VIDEO Calculate the depreciation cost per hour. (Round answer to 2 decimal places, 6.9. $1.25) Depreciation cost per hours Units-of-activity for 2022, assuming machine usage was 480 hours. (Round answer to o decimal places, e.. 5.275.) Depreciation using the Units-of-activity method for 2022 Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT LINK TO VIDEO By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER

Answer 1

(1)

Under double declining balance method,

Depreciation per annum = 2 x straight line depreciation percentage x book value at the beginning of period

And,

Straight line depreciation percentage = 100%/useful life = 100%/8 = 12.5%

Therefore,

For year 2022:

Book value in the beginning = $90000

Depreciation expenses = 2 x 12.5% x $90000 x (3/12)= $5625

Book value at the end = $84375

For year 2023:

Book value in the beginning = $84375

Depreciation expenses = 2 x 12.5% x $84375 = $21093.75 or $21094

Book value at the end = $50625

(2)

Under units of activity method,

Depreciation cost per hour = (initial cost - residual value)/estimated total activity units

= ($90000 - $8000)/70000 = $1.17 per hour

Therefore,

For 2022:

Depreciation = 480 x $1.17 = $562