Question

On January 1, 2018, a machine was purchased for $117,500. The machine has an estimated salvage value of $10,400 and an estimated useful life of 5 years. The machine can operate for 119,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 23,800 hrs; 2019, 29,750 hrs; 2020, 17,850 hrs; 2021, 35,700 hrs; and 2022, 11,900 hrs.

(a)

Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.)

1.		Straight-line Method		$
2.		Activity Method
		Year
		2018		$
		2019		$
		2020		$
		2021		$
		2022		$
3.		Sum-of-the-Years'-Digits Method
		Year
		2018		$
		2019		$
		2020		$
		2021		$
		2022		$
4.		Double-Declining-Balance Method
		Year
		2018		$
		2019		$
		2020		$
		2021		$
		2022		$

Answer 1

	1	SLM:
		Original Cost	117,500				4	Rate=1/Life*2	Rate=1/5*2
		Less: Salavage Value	10,400					Rate=40%			0.2
		Net Depreciable Value	107,100					Original Cost	117,500
		Estimated Life	5					Depreciation Year 1	47,000
		Depreciation PA	21,420	(107100/5)				Closing Book Value	70,500
								Depreciation Year 2	28,200	(Clsoing Book Value Last year*40%)
								Closing Book Value	42,300
	2	Original Cost	117,500
		Less: Salavage Value	10,400					Depreciation Year 3	16,920
		Net Depreciable Value	107,100					Closing Book Value	25,380
		Activity During the Life	119,000
		Rate	0.90					Depreciation Year 4	10,152
								Closing Book Value	15,228
		Year	Activity	Depreciation	(Activity* Rate)
		1	23,800	21,420.00				Depreciation Year 4	4,828	(15228-10400)
		2	29,750	26,775.00				Closing Book Value	10,400
		3	17,850	16,065.00
		4	35,700	32,130.00
		5	11,900	10,710.00
	3	Net Depreciable Value	107,100
		Sum of Life of Asset	15	(1+2+3+4+5)
		Depreciation Per Base	7,140	(107100/15)
		Year	Applicable Base	Depreciation PA	(Applicable Base* Depreciation Per Base)
		1	5	35,700
		2	4	28,560
		3	3	21,420
		4	2	14,280
		5	1	7,140