Question

On January 1, 2015, a machine was purchased for $94,500. The machine has an estimated salvage value of $6,300 and an estimated useful life of 5 years. The machine can operate for 105,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 21,000 hrs; 2016, 26,250 hrs; 2017, 15,750 hrs; 2018, 31,500 hrs; and 2019, 10,500 hrs. Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.) Year Straight-line Method Sum-of-the-years'-digits method Double-declining-balance method 2015 $ $ $ 2016 2017 2018 2019 2020

Answer 1

For Fiscal year ended December 31

Year	Depreciation base	Remaining life	Depreciation fraction	Depreciation expense
1	$          88,200	5	5/15	$             29,400
2	$          88,200	4	4/15	$             23,520
3	$          88,200	3	3/15	$             17,640
4	$          88,200	2	2/15	$             11,760
5	$          88,200	1	1/15	$                5,880

For fiscal year ended sep 30
Sum of Years Digit Method
Year 1 = $29400 x 9/12 = $22050
Year 2 = $29400 x 3/12 + 23520 x 9/12 = $24990
Year 3 = $23520 x 3/12 + $17640 x 9/12 = $19110
Year 4 = $17640 x 3/12 + $11760 x 9/12 = $13230
Year 5 = $11760 x 3/12 + $5880 x 9/12 = $7350
Year 6 = $5880 x 3/12 = $1470