Question

P9-7B In recent years Howard Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the tab below. Useful Life Salvage Value $5,000 Depreciation Method Straight-ine (in years) Acquired July 1, 2012 Cost $68,000 Machine 1 4 Declining-balance 64,000 6,000 2 Apr. 1, 2013 4,000 8 Units-of-activity Sept 1, 2013 84,000 3 For the declining-balance method, Howard Company uses the double- declining rate. For the units-of-activity method, total machine hours are expected to be 40,000. Actual hours of use in the first 3 years were: 2013, 1,200; 2014, 6,400; and 2015, 7,000. Instructions: (a) Compute the amount of accumulated depreciation on each bus at December 31, 2015 (b) If machine 2 was purchased on November 1 instead of April 1, what would be the depreciation expense for this machine in 2013? In 2014? (Round to 9adhe nearest dollar.)

Answer 1

Answer: (a machine coste Saillage Value - useful life Depreciation Expense pes annum = &#xl00) No.of monlts Depreciation rate Depreciation cost Depreciation Expense Accumulatea depreciation Year Z 14-26570%. Em $4500 $4500 2012 $ 63000 $ 13500 $63000 14.2857% 12m 2013 $9000 $9000 $14.285746, $ 63000 12m $22500 2014 $63000 14.2857% 12m $ 9000 $31500 2015 .: Acumulated depreciation on dec 31,2015 = $ 31,000

machine-2 Declining balance x 100 rate 04 per straight line methods Lehellife LX100 = 25.4 irate as per double declining's 262501 750 Beginnmg book value Gepieciety rate No.of months depreciation Expense ZS SOO $ Accumulated depreciation 25500 Book - value 42,500 9m 2013 $ 68000 501 46,750 21,250 42800 21,250 SVl. 12m. $ BE 20134 57375 10,625 21,250 10,625 کام Sol . 12m 57,375 $SAD Accumulated depreciation at dec 31, 2015 = = * = machine-3 units of activity Depreciation cost per unt = cost - salvage value Total Expected machine houn e $84000- $4000 46,000 $2 per unit =

Actual cost /unit Depreciation Expense Accumulated depreciation hous $2400 $2400 2013 1200 $2 $2 $15,200 $12800 2014 6400 $29,200 $14000 7000 $2 2015 $ 29,200 . Accumulated depreciation on dec 31, 2015 - = = on Nov 1 instead of April 1. (6) of machine 2 was parchased $ 68000x 50*1 x 12m ,: depreciation Expense en 2013 - = $5667 = ($ 68000 - $5667) *501. -i depreciation Expenpe in 2014 = $2666 $31,166