Please help with this intro to accounting question! Thank you ! Depreciation Met
ID: 2491928 • Letter: P
Question
Please help with this intro to accounting question! Thank you !
Depreciation Methods Holt Company purchased a new machine on January 1, 2012, at a cost of $150,000. The company estimated that the machine will have a salvage value of $15,000. The machine is expected to be used for 10,000 working hours during its 5-year life. Instructions Compute the depreciation expense under the following methods for the years indicated. Straight-line for 2012 and 2013. Units-of-activity for 2012, assuming machine usage was 700 hours. Declining-balance using double the straight-line rate for 2012 and 2013. Assume the straight-line method is used. What amount of gain or loss would Holt recognize if they sell the asset for $85,000 on 1/1/14?Explanation / Answer
(a) Straight line depreciation = ( cost - salvage value)/ estimated life
= ($150,000 - $15,000)/5
Depreciation for 2012 and 2013 = $27,000 each year
(b) Units of activity method = (150,000 - 15000)/ 10,000 = $13.5 per hour
Depreciation for 2012 = 700 * 13.50 = $9,450
(c) double declining method
depreciation rate = 1/5 *2 = 40%
Depreciation for 2012 = $150,000 @40% = $60,000
Depreciation for 2013 =( $150,000 - $60,000) @40% = $36,000
(d) Accumulated depreciation = $27,000 *2 = $54,000
cost of asset = $150,000
less:Accumulated dep = (54,000)
Book value of assets = $96,000
Sale price = $85,000
Loss on sale = $11,000