Question

Exercise 9-20 Oriole Company purchased a new machine on October 1, 2017, at a cost of $86,400. The company estimated that the machine has a salvage value of $7,100. The machine is expected to be used for 64,300 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 2017 and 2018. (Round answers to 0 decimal places, e.g. 125) 2017 2018 Depreciation using the Declining-balance method $enter a dollar amount $enter a dollar amount LINK TO TEXT Calculate the depreciation cost per hour. (Round answer to 2 decimal places, e.g. $1.25) Depreciation cost per hour $enter the depreciation cost per hour in dollars rounded to 2 decimal places Units-of-activity for 2017, assuming machine usage was 410 hours. (Round answer to 0 decimal places, e.g. 125) Depreciation using the Units-of-activity method for 2017 $enter the units-of-activity depreciation cost for 2017 in dollars

Answer 1

Requirement-I (Using Declining-balance using double the straight- line rate (DDB method)):
Under DDB method, salvage shall not be considered for calculating annual depreciation amount unless the declined book value goes below the expected salvage value in any of the useful life of the asset. Therefore,

Note :

Under DDB method, Depreciation Rate = (l/useful life) x years) x 25%
Depreciation Expense for 2017-$6,400 x 25% $21,600; Book value $5,400 - $21,500 $4,800
Depreciation Expense for 2018 564800 x 25% $16,200; Book value 564800 - $16,200 $48,600.