Reference no: EM132880130
Question - On January 1st, 2017, Sands Company purchased a construction lathe at a cost of $625,000. It was estimated that the machine would have a useful life of 25 years, and a residual value at the end of its useful life of $25,000. Statistics relating to the machine over its useful life are as follows:
Estimated service life under various scenarios:
In years 25
Total Estimated Output in units 300,000
Total Estimated Working Hours 50,000
Actual operation for the first five years of the asset's life produced the following number of units of output and ran for the following number of hours:
|
Year
|
Units of Output
|
Working Hours
|
|
2017
|
9,750
|
1,550
|
|
2018
|
11,250
|
2,150
|
|
2019
|
13,500
|
2,650
|
|
2020
|
10,000
|
1,850
|
|
2021
|
11,500
|
2,300
|
Required - Calculate the depreciation expense amounts for the year 2018 under each of the following methods of recognizing depreciation. Assume Sands has a December 31st year-end.
a) Straight line
b) Units of output; In 2018 the lathe produced 11,250 units as shown above. Round the units of production charge to the nearest cent.
c) Working hours: the lathe ran for 2,150 hours in 2018 - as per above. Round the per-hour charge to the nearest cent.
d) Sum-of-the-year's-digits; (use the formula SYD to calculate the denominator)
e) Double declining balance at twice the straight-line rate (round resulting calculation to two decimal points).