Calculate the depreciation charges for each fiscal year

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Reference no: EM132344613

Question :

On June 15, 2014, a second-hand machine was purchased for $77,000. Before being put into service, the equipment was overhauled at a cost of $5,200, and additional costs of $400 for direct material and $800 for direct labour were paid in fine-tuning the controls. The machine has an estimated residual value of 65,000 at the end of its five-year useful life.

The machine is expected to operate for 100,000 hours before it will be replaced and is expected to produce 1.2 million units in this time. Operating data for the next six fiscal years are provided below. The company has an October 31 fiscal year end. Depreciation expense should be calculated to the nearest half month.

Year Hours of Operation Units Produced

2014 10,000 110,000

2015 20,000 270,000

2016 20,000 264,000

2017 20,000 310,000

2018 18,000 134,000

2019 12,000 112,000

Instructions

Calculate the depreciation charges for each fiscal year under each of the following depreciation methods. Where necessary, round depreciation rate per unit to four decimal places.

1. Straight-line method

2. Activity method: based on output

Reference no: EM132344613

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