Reference no: EM132611783

On January 1, 2012, Tiggy Company purchased the following two machines for use in its production process.

Machine A: The cash price of this machine was $38,000. Related expenditures included: sales tax $1,700, shipping costs $150, insurance during shipping $80, installation and testing costs $70, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Tiggy estimates that the useful life of the machine is 5 years with a $5,000 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.

Machine B: The recorded cost of this machine was $160,000. Tiggy estimates that the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period.

Instructions

Question 1: Calculate the amount of depreciation expense that Tiggy should record for machine B each year of its useful life under the following assumptions.

(1) Tiggy uses the straight-line method of depreciation.

(2) Tiggy uses the declining-balance method. The rate used is twice the straight-line rate.

(3) Tiggy uses the units-of-activity method and estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2012, 45,000 units; 2013, 35,000 units; 2014, 25,000 units; 2015, 20,000 units.