Problem 11-2 /1 Your answer is partially correct. Try again The cost of equipmen
ID: 2565621 • Letter: P
Question
Problem 11-2 /1 Your answer is partially correct. Try again The cost of equipment purchased by Sheridan, Inc., on June 1, 2017, is $109,470. It is estimated that the machine will have a $6,150 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 51,660, and its total production is estimated at 645,750 units. During 2017, the machine was operated 7,380 hours and produced 67,650 units. During 2018, the machine was operated 6,765 hours and produced 59,040 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 O decimal places, e.g. 45,892.) 2017 2018 8610 (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) 14760 10824 9446 14760 13530 25830 22140 31277 8936Explanation / Answer
c.
Sum of year’s digit depreciation = Depreciable base x (Remaining useful life/sum of year’s digit)
Sum of year’s digit depreciation for 1st year of machine (from 1June 2017 to 31 May 2018)
= $ 109,470 - $ 6,150 x (7/1+2+3+4+5+6+7)
= $ 109,470 - $ 6,150 x (7/28)
= $ 103,320 x 0.25
= $ 25,830
Sum of year’s digit depreciation for 2st year of machine (from 1June 2018 to 31 May 2019)
= $ 109,470 - $ 6,150 x (6/28)
= $ 103,320 x 0.214286
= $ 22,140
For 2017 sum of year’s digit depreciation = $ 25,830 x 7/12 = $ 25,830 x 0.583333 = $ 15,067.50
For 2018 sum of year’s digit depreciation:
$ 25,830 x 5/12 = $ 25,830 x 0.416667 = $ 10,762.50
$ 22,140 x 7/12 = $ 22,140 x 0.583333 = $ 12,915.00
Total = $ 23,677.50
d.
Double decline balance depreciation for a period = 2 x straight line depreciation rate x beginning book value
Straight line depreciation Rate = 1/7
For 2017 Double decline balance depreciation = 2/7 x $ 109,470 x 7/12
= 0.285714 x $ 109,470 x 0.583333
= $ 18,245
For 1018 Double decline balance depreciation = 2/7 x ($ 109,470 -$ 18,245)
= 0.285714 x $ 91,225 = $ 26,064.29