In: Accounting
In order to improve its business processes, Martin Corp. Ltd.
purchased a new machine on July 1, 2017. The cost price of the
machine was $1,250,000. Martin Corp. estimated that the machine
will have a useful life of 5 years at the end of which its salvage
value will be $32,000. The machine is estimated to produce 496,000
units and work 62,000 hours.
.
During 2017, Martin Corp. used the machine for 6,000 hours and
produced 52,000 units.
Martin Corp. financial year ends December 31 and it depreciates
this item of PPE on the basis of the nearest full month.
Required:
Note – Each calculation should be considered unrelated. Round
dollar values computed to 2 decimal places.
Calculate depreciation expense under the following:
a) Straight line method for 2017.
b) Activity method for 2017, using units of output.
c) Activity method for 2017, using working hours.
d) Sum of the years digit method for 2018.
e) Double declining balance method for 2018. (10 marks
Can you please provide the information in order for me to copy and paste in word. Thanks in advance.
Answer to Part a.
Straight Line Depreciation per year = (Cost - Salvage Value)/ Useful Life
Straight Line Depreciation per year = (1,250,000 - 32,000)/ 5
Straight Line Depreciation per year = $243,600
Straight Line Depreciation for Year 2017 = $243,600 * 6/12
Straight Line Depreciation for Year 2017 = $121,800
Answer to Part b.
Activity Rate Depreciation = (Cost - Salvage Value)/ Estimated Production
Depreciation per unit produced= (1,250,000 -32,000)/ 496,000
Depreciation per unit produced = $2.46
Depreciation Expense for the year 2017 = $2.46 * 52,000
Depreciation Expense for the Year 2017 = $127,920
Answer to Part c.
Depreciation expense per hour = (1,250,000 - 32,000)/ 62,000
Depreciation Expense per hour = $19.65
Depreciation Expense for the Year 2017 = $19.65 * 6,000
Depreciation Expense for the Year 2017 = $117,900
Answer to Part d.
Depreciation for the year 2017 = (1,250,000 - 32,000) * 5/15 * 6/12
Depreciation Expense for the year 2017 = $203,000