Reference no: EM133136839

Question - Gruman Company purchased a machine for $220,000 on January 2, 2016. It made the following estimates:

Service life 5 years or 10,000 hours

Production 200,000 units

Residual value $20,000

In 2016, Gruman uses the machine for 1,800 hours and produces 44,000 units. In 2017, Gruman uses the machine for 1,500 hours and produces 35,000 units. If required, round your final answers to the nearest dollar.

Required -

1. Compute the depreciation for 2016 and 2017 under each of the following methods:

i. Activity method based on hours worked

ii. Activity method based on units of output

2. For each method, what is the book value of the machine at the end of 2016? At the end of 2017?

i. Activity method based on hours worked

ii. Activity method based on units of output