Question

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 $

Answer 1

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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