Acquisition Cost and Depreciation Reveille Inc purchased Mac

Acquisition Cost and Depreciation

Reveille, Inc., purchased Machine #204 on April 1, 2016, and placed the machine into production on April 3, 2016. The following information is relevant to Machine #204:

The company expects that the machine could be used for 10 years, after which the salvage value would be zero. However, Reveille intends to use the machine only 8 years, after which it expects to be able to sell it for $9,800. The invoice for Machine #204 was paid April 10, 2016. The number of units produced in 2016 and 2017 was 23,200 and 29,000, respectively. Reveille computes depreciation expense to the nearest whole month.

Required:

Compute the depreciation expense for 2016 and 2017, using the following methods. Round your answers to the nearest dollar.

Straight-line method:
2016 depreciation = $
2017 depreciation = $

Sum-of-the-years\'-digits method:
2016 depreciation = $
2017 depreciation = $

Double-declining-balance method:
2016 depreciation = $
2017 depreciation = $

Activity method (units of production):
2016 depreciation = $
2017 depreciation = $

Solution

Cost of the asset :

Price:. 60000

Discount of 2% 1200

Payment to supplier. 58800

Freight expenses: 2500

Preparation and installation 3900

Total cost: 65100

Depreciation- straight line method

2016-- (65100 - 9800)/ 8*9/12 = 5184

2017 - 6912

Depreciation - sum of the years method

2016 - 55300 * 8/36 = 12288

2017 - 55300 *7/36. = 10752

Depreciation - double declining method

2016 - 55300* 25% = 13825

2017 - (55300-13825) *25% = 10369

Depreciation - activity method

2016 depreciation - 55300*23200/138500 = 9263

2017 depreciation - 55300* 29000/ 138500 = 11580