In: Accounting
Sandhill Co. purchased a new machine on October 1, 2022, at a cost of $88,100. The company estimated that the machine has a salvage value of $5,700. The machine is expected to be used for 80,000 working hours during its 10-year life.
Compute depreciation using the following methods in the year indicated.
Declining-balance using double the straight-line rate for 2022 and 2023. 2022 2023 Depreciation using the Declining-balance method $
Calculate the depreciation cost per hour. (Round answer to 2 decimal places, e.g. $1.25)
Depreciation cost per hour $ Units-of-activity for 2022, assuming machine usage was 460 hours. (Round answer to O decimal places, e.g. 5,275.)
Depreciation using the Units-of-activity method for 2022 $
Double declining depreciation rate = 2 x 1/useful life
= 2 x 1/10
= 20%
Depreciation expense for year 2022 = Cost of machine x Double declining depreciation rate
= 88,100 x 20% x 3/12
= $4,405
Book value of machine at the beginning of year 2023 = Cost of machine - Depreciation expense for year 2022
= 88,100-4,405
= $83,695
Depreciation expense for year 2023 = Book value of machine at the beginning of year 2023 x Double declining depreciation rate
= 83,695 x 20%
= $16,739
2022 | 2023 | |
Depreciation using the Declining balance method | $4,405 | $16,739 |
Depreciation cost per hour = ( cost of machine - Salvage value )/ Useful life
= ( 88,100-5,700)/80,000
= $1.03 per hour
Depreciation using units of activity method for 2022 = Depreciation cost per hour x Number of hours used
= 1.03 x 460
= $474
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