Question

Wildhorse Corp. purchased machinery for $347,100 on May 1, 2020. It is estimated that it will have a useful life of 10 years, salvage value of $17,100, production of 264,000 units, and working hours of 25,000. During 2021, Wildhorse Corp. uses the machinery for 2,650 hours, and the machinery produces 30,000 units. From the information given, compute the depreciation charge for 2021 under each of the following methods. (Round intermediate calculations to 2 decimal places, e.g. 5.25 and final answers to o decimal places, e.g. 45,892.) (a) Straight-line (b) Units-of-output (c) Working hours (d) Sum-of-the-years'-digits (e) Declining-balance (use 20% as the annual rate) e

explanation very appreciated

Answer 1

1. Straight line method.

Depreciation per 2021 = ( 347100 - 17100 ) / 10 = $ 33000.

2. Units of Output.

Depreciation per unit = ( 347100 - 17100 ) / 264000 = $ 1.375

Depreciation for 2021 = 30000 * 1.375 =$ 41250.

3. Working hours

Depreciation per hour= ( 347100 - 17100 ) / 25000 = $ 13.2.

Depreciation for 2021 = 2650 * 13.2 = $ 34980.

4. Sum of years digits.

Sum of 10 years = 55.

Depreciation for 2021 = ( 347100 - 17100 ) * ( 9.333 / 55 ) = $ 56000

5. Double decline method.

Depreciation for 2020 = 347100 * 20% * ( 8 / 12 ) = $ 46280.

Depreciation for 2021 = ( 347100 - 46280 ) * 20% = $ 60164