Question

Sheridan Ltd. purchased a new machine on April 4, 2017, at a cost of $164,000. The company estimated that the machine would have a residual value of $16,000. The machine is expected to be used for 14,800 working hours during its four-year life. Actual machine usage was 1,400 hours in 2017; 2,100 hours in 2018; 2,400 hours in 2019; 2,300 hours in 2020; and 2,000 hours in 2021. Sheridan has a December 31 year end.

Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, e.g. 2.75 and final answers to 0 decimal places, e.g. 5,275.)

(1) Straight-line for 2017 through to 2021.

2017 expense		$enter a dollar amount
2018 expense		$enter a dollar amount
2019 expense		$enter a dollar amount
2020 expense		$enter a dollar amount
2021 expense		$enter a dollar amount

(2) Diminishing-balance using double the straight-line rate for 2017 through to 2021.

2017 expense		$enter a dollar amount
2018 expense		$enter a dollar amount
2019 expense		$enter a dollar amount
2020 expense		$enter a dollar amount
2021 expense		$enter a dollar amount

(3) Units-of-production for 2017 through to 2021.

2017 expense		$enter a dollar amount
2018 expense		$enter a dollar amount
2019 expense		$enter a dollar amount
2020 expense		$enter a dollar amount
2021 expense		$enter a dollar amount

  

3. Which method results in the highest depreciation expense over the life of the asset? Highest net income? Highest cash flow?

4. Which method results in the highest net income?

5. Which method results in the highest cash flow?

Answer 1