Question

In: Accounting

Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates:...

Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates:

Service life 5 years or 10,000 hours
Production 180,000 units
Residual value $ 18,000

In 2019, Gruman uses the machine for 2,000 hours and produces 50,000 units. In 2020, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar.

Required:

  1. Compute the depreciation for 2019 and 2020 under each of the following methods:
  1. Straight-line method
    2019 $
    2020 $
  2. Sum-of-the-years'-digits method
    2019 $
    2020 $
  3. Double-declining-balance method
    2019 $
    2020 $
  4. Activity method based on hours worked
    2019 $
    2020 $
  5. Activity method based on units of output
    2019 $
    2020 $
  1. For each method, what is the book value of the machine at the end of 2019? At the end of 2020?
  1. Straight-line method
    2019 $
    2020 $
  2. Sum-of-the-years'-digits method
    2019 $
    2020 $
  3. Double-declining-balance method
    2019 $
    2020 $
  4. Activity method based on hours worked
    2019 $
    2020 $
  5. Activity method based on units of output
    2019 $
    2020 $
  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
    2019 $
    2020 $
  2. Sum-of-the-years'-digits method
    2019 $
    2020 $
  3. Double-declining-balance method
    2019 $
    2020 $

Book value

  1. Straight-line method
    2019 $
    2020 $
  2. Sum-of-the-years'-digits method
    2019 $
    2020 $
  3. Double-declining-balance method
    2019 $
    2020 $

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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