A company purchased a machine on January 1 of the current year for $750,000.Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours,with a salvage value of $75,000)using each of the below-mentioned methods.During the machine's 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.

Question

A company purchased a machine on January 1 of the current year for $750,000.Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours,with a salvage value of $75,000)using each of the below-mentioned methods.During the machine's 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.
A company purchased a machine on January 1 of the current year for $750,000.Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours,with a salvage value of $75,000)using each of the below-mentioned methods.During the machine's 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.

CIELO IBARRA · Accepted Answer

Final Answer :

Straight-line: ($750,000 - $75,0000)/ 5 years = $135,000 per year
Units of production: ($750,000 - $75,000)/ 20,000 hours = $33.75 per hour
Year 1 hours 3,000 * $33.75 = $101,250
Year 2 hours 4,000 * $33.75 = $135,000
Year 3 hours 5,000 * $33.75 = $168,750
Year 4 hours 5,000 * $33.75 = $168,750
Year 5 hours 3,000 * $33.75 = $101,250
Double-declining:
Year 1 $750,000 * 40% = $300,000
Year 2 ($750,000 - $300,000)* 40% = $180,000
Year 3 ($750,0000 - $480,000)* 40% = $108,000
Year 4 ($750,000 - $588,000)* 40% = $64,800
Year 5 ($750,000 - $652,800)* 40% = $38,880 but limited to $22,200 by salvage value

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