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Calculate the annual depreciation and total depreciation

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Reference no: EM132539902

Cullumber Limited purchased a machine on account on April 2, 2018, at an invoice price of $330,810. On April 4, it paid $2,120 for delivery of the machine. A one-year, $3,960 insurance policy on the machine was purchased on April 5. On April 18, Cullumber paid $7,640 for installation and testing of the machine. The machine was ready for use on April 30.

Cullumber estimates the machine's useful life will be five years or 6,207 units with a residual value of $81,070. Assume the machine produces the following numbers of units each year: 930 units in 2018; 1,408 units in 2019; 1,526 units in 2020; 1,263 units in 2021; and 1,080 units in 2022. Cullumber has a December 31 year end.

Question 1: Determine the cost of the machine.

Question 2: Calculate the annual depreciation and total depreciation over the asset's life using: (Round the depreciation cost per unit to the nearest cent. Round answers to 0 decimal places, e.g. 5,275.)

(1) Straight-line method

(2) Double-diminishing-balance method

(3) Units-of-production method

Question 3: Which method causes net income to be lower in the early years of the asset's life?

Reference no: EM132539902

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