On January 1, 2012, a machine was purchased for $90,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 5 years.
On January 1, 2012, a machine was purchased for $90,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 5 years. The machine can operate for 100,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2012, 20,000 hours; 2013, 25,000 hours; 2014, 15,000 hours; 2015, 30,000 hours; and 2016, 10,000 hours.
\r\nInstructions
\r\n(a) Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods.
\r\n(1) Straight-line method. (3) Sum-of-the-years’-digits method.
\r\n(2) Activity method. (4) Double-declining-balance method.
\r\n(b) Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods.
\r\n(1) Straight-line method. (3) Double-declining-balance method.
\r\n(2) Sum-of-the-years’-digits method.