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# ID WK 4 Grd upload - Chapter 11 E11-4(LO 2,3(Depreciation...

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Chapter 11 E11-4 (LO 2,3) (Depreciation Computation - Five Method) Jon Seceda Furnace Corp purchased machinery for 315,000 on May 1, 2007. It is estimated that it will have a useful life of 10 yrs, salvage value of \$15,000, production of 240,000 units and working hours of 25,000. During 2008, Seceda Corp uses the machinery of 2,650 hours and the machinery produces 25,500 units Form the information given, compute the depreciation charge for 2008 under each of the following Methods (round to the neareth dollar) a) Straight-line b) Units - of - output c) working hours d) sum-of-the -years- digits e) declining-balance (use 20 percent as the annual rate) A) Straight - line Cost less salvage = Depreciation Charge EXERCISE 11-4 Estimated service life \$315,000 – \$15,000 = \$300,000; \$300,000 ÷ 10 yrs. = \$30,000 315,000-15,000=300,000 = 20,000 \$300,000 ÷ 240,000 units = \$1.25; 25,500 units X \$1.25 = \$31,875 15 \$300,000 ÷ 25,000 hours = \$12.00 per hr.; 2,650 hrs. X \$12.00 = \$31,800 B) Unit - of - output (d) n(n + 1) = 10(11) 55 2 2 (cost less salvage) x hrs this year = Depreciation Charge total estimated hours 10 X \$300,000 X 1/3 = \$18,182 55 (315,000-15,000)x(2650)=795,000,000 31,800 25,000 9 X \$300,000 X 2/3 = 32,727 55 C) Working hours Total for 2008 \$50,909 D) Sum-of-the-year-digits (e) \$315,000 X 20% X 1/3 = \$21,000 300,000 x 10 / 55 = 54,545 54,545 33,600 e) declining-balance (use 20 percent as the annual rate) Total for 2008 \$54,600 \$315,000 x . .20 = 63,000 63,000 [May also be computed as 20% of (\$315,000 – 2/3 of 20% of \$315,000)] 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 OR [\$315,000 – (\$315,000 X 20%)] X 20% X 2/3 =

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Chapter 11 E11-11 (LO 2,3) (Depreciation - Change in Estimate) Machinery purchase for \$60,000 by Tom Brady Co in 2003 was orgininally estimated to have a life of
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ID WK 4 Grd upload - Chapter 11 E11-4(LO 2,3(Depreciation...

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