Problem 11-2 The cost of equipment purchased by Coronado, Inc on June 1, 2017, i
ID: 2396363 • Letter: P
Question
Problem 11-2 The cost of equipment purchased by Coronado, Inc on June 1, 2017, is $89,890. It i l have a S5,050 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,420, and its total production is estimated at 530,250 units. During 2017, the machine was operated 6,050 hours and produced 55,550 units, During 2018, the machine was operated 5,555 hours and produced 48,480 units. is estimated that the machine wil 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. 15.2 al answers to O decmal places, e.g. 45,892.) 017 2018 (a) Straight-line (b) Units-of-output (c) Working hours (d) Sum-of-the-years'-digits (e) Double-declining-balance (twice the straight-line rate) klik if ??,,JE Wse,nibi liiba: ies sai 140rwww.ats: ifear ?????.. JIt'taior::Explanation / Answer
Depreciable Cost = 89890 - 5050 = $84,840
(a) Straight Line method
Annual Depreciation = Depreciable cost / number of years = 84840 / 7 = $12,120
For 2017 the equipment will be depreciated for only 7 months because the equipment is purchased on 1st June.
Depreciation 2017 = 12120*7/12 = $7,070
Depreciation 2018(full year) = $12,120
(b) Units of output
Depreciation per produced unit = 84840 / 530250 = $0.16 per produced unit
Depreciation 2017 = 55550*0.16 = $8,888
Depreciation 2018 = 48480*0.16 = $7,756.8
(c) Working hours
Depreciation per hour = 84840 / 42420 = $2 per hour
Depreciation 2017 = 6060*2 = $12,120
Depreciation 2018 = 5555*2 = $11,110
(d) Sum of year's digit
Sum of digits = 1+2+3+4+5+6+7 = 28
Depreciation 2017 = 84840*7/28 = $21,210
Depreciation 2018 = 84840*6/28 = $18,180