Problem 11-11 (Part Level Submission)On January 1, 2015, a machine was purchased for $101,700. The machine has an estimated salvage value of $6,780 and an estimated useful life of 5 years. The machine can operate for 113,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 22,600 hrs; 2016, 28,250 hrs; 2017, 16,950 hrs; 2018, 33,900 hrs; and 2019, 11,300 hrs.(a)Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. 1. Straight-line method 2. Activity Method 3. Sum of the years digits Method 4. Double Declining Balance Method (Round answers to 0 decimal places, e. g. 45,892.)(b)Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the assets life applying each of the following methods. 1. Straight line Method 2. Sum of the years digits Method 3. Double Declining Method

Explanation:

Cost of the machine =101700

salvage value -6780

Useful life - 5 years

Depreciable amount = 101700-6780=94920

a)Straight line depreciation

Depreciable amount/ useful years

= (101700-6780)/5

=2015-18,984,  2016-18984, 2017- 18984,2018 -18984, 2019-18984

b)Activity method depreciation

activity/ total level of activity *94920

           2015                                      2016                                      2017

=22600/113000*94920          28250/113000*94920    16950/113000*94920

=18,984                                           23,730                                14238

             2018                                                               2019

    33900/113000*94920=28476         11300/113000*94920 =9492              

c)Sum of the year digit method

Remain useful life /sum of digit* depreciation amount

          2015                                        2016                                   2017

   5/15 *94920 = $31640        4/15*94920 =25312          3/15*94920= 18984

            2018                                      2019

     2/15*94920 =12,656        1/15*94920 =6328

d)Double declining balance method

2*depreciation rate *opening book value (depreciation rate=20%) (1/5*100)

           2015                                               2016                                 2017

2*20% =101700 = 40680        40%*61020= 24408       40%*36612=14645

      2018                                         2019

 $40%*21967 =8787                   40%*13180=5272

For fiscal year end September 30 (9 months , 3/4 year)

a)Straight line method =      2015                         2016                    2017  

                                          18984*3/4=14238        18984                 18984

                            2018= 18984       2019= 18984

b)Sum of the years =        2015                            2016                     2017

                                    31640*3/4 =23,730             25312             18984

     2018 12656             2019 66328

c)Double declining method = 2015 =40%*101700*3/4= 30510

2016 =71190*40%=28476

2017 = 42714*40%=17086.

2018 25628*40%=10251

2019=15377*40%=6151

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