Problem 11-2 The cost of equipment purchased by Marigold, Inc., on June 1, 2017,

Question

Problem 11-2

The cost of equipment purchased by Marigold, Inc., on June 1, 2017, is $105,020. It is estimated that the machine will have a $5,900 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 49,560, and its total production is estimated at 619,500 units. During 2017, the machine was operated 7,080 hours and produced 64,900 units. During 2018, the machine was operated 6,490 hours and produced 56,640 units.

Compute depreciation expense on the machine for the year ending December 31, 2017, and the year ending December 31, 2018, using the following methods. (Round depreciation per unit to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 45,892.)

2017 2018 (a) Straight-line with available attempts. (c) Working hours (d) Sum-of-the-years'-digits (e) Double-declining-balance (twice the straight-line rate)

Explanation / Answer

Calculate depreciation expense :

2017 2018 Straight line (105020-5900/7)*7/12 = 8260 (105020-5900/7) = 14160 Unit of output (105020-5900/619500)*64900 = 10384 (105020-5900/619500)*56640 = 9062 Working hours (105020-5900/49560)*7080 = 14160 (105020-5900/49560)*6490 = 12980 Sum of the years digit (105020-5900*7/28)*7/12 = 14455 (105020-5900*7/28*5/12)+(105020-5900*6/28*7/12) = 22715 Double declining balance 105020*28.57%*7/12 = 17503 (105020*28.57%*5/12+105020*71.43%*28.57%*7/12) = 25004

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