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# please answer all Crane Limited purchased a machine on account on April 2, 2018, at an...

Crane Limited purchased a machine on account on April 2, 2018, at an invoice price of $360,090. On April 4, it paid$1,850 for delivery of the machine. A one-year, $4,250 insurance policy on the machine was purchased on April 5. On April 18, Crane paid$8,280 for installation and testing of the machine. The machine was ready for use on April 30.

Crane estimates the machine’s useful life will be five years or 6,018 units with a residual value of $85,700. Assume the machine produces the following numbers of units each year: 859 units in 2018; 1,504 units in 2019; 1,312 units in 2020; 1,267 units in 2021; and 1,076 units in 2022. Crane has a December 31 year end. 1. determine the cost of the machine 2. calculate  Depreciable Cost Depreciation Expense Accumulated Depreciation Carrying Amount using a. straight line method, b. double diminishing method, c. units of production method 3. Which method causes net income to be lower in the early years of the asset’s life? ## Solutions ##### Expert Solution  a. Computation of Cost of machine$ Invoice price $3,60,090.00 Delivery charges$1,850.00 Installation and testing $8,280.00 Total cost of machine$3,70,220.00
 Straight line method: Year Depreciable Cost (a) Depreciation Expense (b) Accumulated Depreciation (c ) Carrying Amount (a-c) 2018 $2,84,520$56,904 $56,904$2,27,616 2019 $2,84,520$56,904 $1,13,808$1,70,712 2020 $2,84,520$56,904 $1,70,712$1,13,808 2021 $2,84,520$56,904 $2,27,616$56,904 2022 $2,84,520$56,904 $2,84,520$0 Note Depreciable cost = Cost of Machine - Residual Value = 370220 - 85700= Depreciation Expense = 284520/5 =$56904  Double-Diminishing Balance method: Year Opening Carrying Amount (a) Depreciation Expense (b) Accumulated Depreciation ( C) Carrying Amount (a-b) 2018$3,70,220 $1,48,088$1,48,088 $2,22,132 2019$2,22,132 $88,853$2,36,941 $1,33,279 2020$1,33,279 $53,312$2,90,252 $79,968 2021$79,968 $31,987$3,22,239 $47,981 2022$47,981 $19,192$3,41,432 $28,788 Note:- depreciation Rate = 2 X 1/5= 40%  Units-of-production method: Year Depreciable Cost (a) Depreciation Expense (b) Accumulated Depreciation ( C) Carrying Amount (a-c) 2018$2,84,520 =284520/6018*859=40612 $40,612$2,43,908 2019 $2,84,520 =284520/6018*1504=71106$1,11,718 $1,72,802 2020$2,84,520 =284520/6018*1312=62029 $1,73,747$1,10,773 2021 $2,84,520 =284520/6018*1267=59901$2,33,648 $50,872 2022$2,84,520 =284520/6018*1076= 50871 $2,84,519$1

3. Double diminishing Value method

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