Question

In: Accounting

Hanson Manufacturing Company purchased a machine for $1,060,000 at the beginning of 2018. The machine has...

Hanson Manufacturing Company purchased a machine for $1,060,000 at the beginning of 2018. The machine has an estimated useful life of five years and an estimated residual value of $270,000. The machine, which is expected to last 20,000 hours, was operated 3,000 hours in 2018 and 2,000 hours in 2019.

REQUIRED:

1. Compute the annual depreciation for 2018 and 2019 under the following depreciation methods. You must show all of your work to receive any credit.

(a) Straight-line:

(b) Units of production:

(c) Double-declining balance:

No. 5 continued:

2. Assume the machine is sold at the beginning of 2020 for $760,000. Prepare the journal entry to record the disposal of the machine under each of the three methods.

(a) Straight-line:

(b) Units of production:

Solutions

Expert Solution

Answer to part 1

(a) Depreciation under straight line = (Cost of assets - residual value)/useful life of assets

= (1060000 - 270000)/5

= 158000

(b) Depreciation under units of production method for year 2018 = (cost of assets - residual value)*operated hours in 2018/Estimated total operated hours

= (1060000 - 270000)*3000/20000

= 790000*3000/20000

= 118500

Depreciation For 2019 = (1060000 - 270000)*2000/20000

= 790000*2000/20000

= 79000

under straight line the depreciation percentage = 1/useful life

= 1/5

= 20%

in double declining the depreciation % per year = 20%*2

= 40%

so Depreciation in 2018 = 1060000*40%

= 424000

and Depreciation in 2019 = (1060000-424000)*40%

= 636000*40%

= 254400

Answer to part 2 -

Under straight line -

Under Units of Production Method -

Under Double Decling of assets -

Please check with your answer and let me know.

ekkarill92 answered 1 year ago

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