Question

In recent years, Cullumber Company has purchased three machines.

Answer 1

Answer:

Cullumber Company

The depreciation expense for machine 2 in 2016 is:

$16,200

Explanation:

a) Data and Calculations:

Machine Acquired    Cost        Salvage Value   Useful Life     Depreciation

                                                                             (in years)          Method

1 Jan. 1, 2015         $134,000     $34,000                10        Straight-line

2 July 1, 2016            81,000           11,100                 5        Declining-balance

3 Nov. 1, 2016           77,500          8,500                 6        Units-of-activity

Total machine hours expected = 34,500

Actual hours of use in the first 3 years were:

2016       730

2017   5,900

2018   7,600

Double-declining method:

Depreciation expense for machine 2 = $16,200 ($81,000 * 40% *6/12)