Rotting company purchased a new machine on October 1 2017 at

Rotting company purchased a new machine on October 1, 2017, at a cost of 149000. The company estimated that the machine will have a stage value of 14800. The machine is expected to be used for 10900 working hours during it\'s 4 year life.

Compute depreciate expense under straight line method for 2017.

Compute depreciation expense under units-of-activity for 2017, assuming machine usage was 1500 hours.

Compute depreciation expense under declining balance using double the straight line rate for 2017 and 2018.

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Solution

1) Depreciatrion Expense under straight line method for 2017 = (Cost of the Machine - Stage value)/Useful Life

= (149000 - 14800)/4 = 134200/4 = 33550

2) Depreciation expense under units-of-activity for 2017 =

((Cost of the Machine - Stage value)/ total working hours) * Machine Usage in 2017

= ((149000-14800)/10900) * 1500 = (134200/10900) * 1500 = 12.3119 * 1500 = 18467.85

3. Depreciation expense under declining balance Method = Cost of machine * Depreciation rate

Depreciation for Year 2017 = 109000 * 50%(Note 1) = 54500

Depreciation for Year 2018 = 54500 * 50% (Note 1 ) = 27250

Note 1 : - Calculation of Depreciation rate under declining balance method =

As per Question Input = Rate under Declining balance method = 2 * Rate under Straight line method

= 2 * 25% (Note 2) = 50%

Note 2 : Calculation of Depreciation rate under declining balance method =

(Depreciation / Cost of Machine - Stage value))

= (33550* / (149000 - 14800) = 25%

* - Calculated in Answer 1