Question

Robert Parish Corporation purchased a new assembly process on August 1, 2017. The cost of this machine was $117,900. The company have a salvage value of $12,900 at the end of its service life. Its life is estimated 21,000 hours. Year-end is December 31. estimated that the machine would at 5 years, and its working hours are estimated at Instructions Compute the depreciation expense under the following methods. Each of the following should be considered unrelated.
(a) Straight-line depreciation for 201:7.
(b) Activity method for 2017, assuming that machine usage was 800 hours.
(c) Sum-of-the-years-digits for 2018.
(d) Double-declining-balance for 2018.

Answer 1

Answer:

8750

4000

$74,060

39,300

Explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

(117,900 - 12,900) / 5 = $21,000

the machine was used for 5 months in 2017. the depreciation expense in 2017 = 5/12 x  $21,000 = $8750

b. Activity method based on hours worked = (hours worked that year / total hours of the machine) x  (Cost of asset - Salvage value)

(800 / 21,000) x (117,900 - 12,900)  = $4000

c. Sum-of-the-year digits = (remaining useful life / sum of the years ) x  (Cost of asset - Salvage value)

remaining useful life in 2018 = (4 + 7/12) + 3 + 2 + 1 = 10.58

10.58 /  15 x (117,900 - 12,900)  = $74,060