Question

In recent years, Sandhill Co. has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.

Machine		Acquired		Cost		Salvage Value		Useful Life (in years)		Depreciation Method
1		Jan. 1, 2015		$137,000		$49,000		8		Straight-line
2		July 1, 2016		96,000		12,100		5		Declining-balance
3		Nov. 1, 2016		69,000		9,000		6		Units-of-activity

For the declining-balance method, Sandhill Co. uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 30,000. Actual hours of use in the first 3 years were: 2016, 720; 2017, 5,500; and 2018, 7,200.

Compute the amount of accumulated depreciation on each machine at December 31, 2018.

		MACHINE 1		MACHINE 2		MACHINE 3
Accumulated Depreciation at December 31		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount

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If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2016? In 2017?

		2016		2017
Depreciation Expense		$enter a dollar amount		$enter a dollar amount

Answer 1

Machine 1
(137000-49000)/8
11000
Accumulated depreciation from jan 1,2015 to dec 31,2018
11000*4
44000
Machine 2
double declining rate
1/5*2
40%
july 1,2016 to dec 31,2016			96000*40%*6/12=			19200
jan 1,2017   to dec 31,2017			(96000-19200)*40%=			30720
jan 1,2018 to dec 31,2018			(96000-19200-30720)*40%=			18432
Accumulated depreciation						68352
Machine 3
units of activity rate
(69000-9000)/30000
2	per hour
Accumulated dep		(720+5500+7200)*2
		26840
				Machine 1	machine 2	machine 3
Accumulated depreciation				44000	68352	26840
				2016	2017
Depreciation expense				28800	26880
Machine2
(96000*40%*9/12)=				28800
(96000-28800)*40%				26880