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Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the following estimates:...

Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the following estimates:

Service life

5 years or 10,000 hours

Production

180,000 units

Residual value

$ 18,000

In 2016, Gruman uses the machine for 2,000 hours and produces 40,000 units. In 2017, Gruman uses the machine for 1,200 hours and produces 30,000 units. If required, round your final answers to the nearest dollar.

  1. Compute the depreciation for 2016 and 2017 under each of the following methods:
  1. Straight-line method
    2016 $
    2017 $
  2. Sum-of-the-years'-digits method
    2016 $
    2017 $
  3. Double-declining-balance method
    2016 $
    2017 $
  4. Activity method based on hours worked
    2016 $
    2017 $
  5. Activity method based on units of output
    2016 $
    2017 $
  1. For each method, what is the book value of the machine at the end of 2016? At the end of 2017?
  1. Straight-line method
    2016 $
    2017 $
  2. Sum-of-the-years'-digits method
    2016 $
    2017 $
  3. Double-declining-balance method
    2016 $
    2017 $
  4. Activity method based on hours worked
    2016 $
    2017 $
  5. Activity method based on units of output
    2016 $
    2017 $
  1. If Gruman used a service life of 8 years or 15,000 hours and a residual value of $9,000 , what would be the effect on the following under the straight-line, sum-of-the-years'-digits, and double-declining-balance depreciation methods?

Depreciation expense

  1. Straight-line method
    2016 $
    2017 $
  2. Sum-of-the-years'-digits method
    2016 $
    2017 $
  3. Double-declining-balance method
    2016 $
    2017 $

Book value

  1. Straight-line method
    2016 $
    2017 $
  2. Sum-of-the-years'-digits method
    2016 $
    2017 $
  3. Double-declining-balance method
    2016 $
    2017 $

Solutions

Expert Solution

ekkarill92 answered 6 months ago
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