Question

Question 1 In recent years, Sandhill Corporation has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine Acquired Cost Residual Value Useful Life (in years) Depreciation Method 1 Jan. 1, 2018 $104,000 $12,600 5 Straight-line 2 July 1, 2019 91,250 9,150 5 Diminishing-balance 3 Nov. 1, 2019 56,434 6,570 6 Units-of-production For the diminishing-balance method, Sandhill Corporation uses double the straight-line rate. For the units-of-production method, total machine hours are expected to be 21,680. Actual hours of use in the first 3 years were: 2019, 420; 2020, 4,110; and 2021, 5,390. Machine 3: Units-of-production depreciation Calculation End of Year Year Units-of- Production Depreciation Cost/Unit Depreciation Expense Accumulated Depreciation Carrying Amount 2019 $ $ $ $ 2020 2021 If Machine 2 was purchased on October 1 instead of July 1, what would be the depreciation expense for this machine in 2019? In 2020? Depreciation expense in 2019 $ Depreciation expense in 2020 $

Answer 1

Depreciation expense per unit = ( 56434-6570)/21680 = 2.30

Machine 3: Units-of-production depreciation Calculation End of Year Year Units-of- Production Depreciation Cost/Unit Depreciation Expense Accumulated Depreciation Carrying Amount 2019 420 $2.30 $966 $966 55468 2020 4110 2.30 9453 10419 46015 2021 5390 2.30 12397 22816 33618 If Machine 2 was purchased on October 1 instead of July 1, what would be the depreciation expense for this machine in 2019? In 2020? Depreciation expense in 2019 $91250*40%*3/12 = 9125 Depreciation expense in 2020 91250*40%*9/12+91250*60%*40%*3/12 = 32850