P10-2B In recent years, Escobar Company purchased three machines. Because of heavy
turnover in the accounting department, a different accountant was in charge of selecting the depreciation
method for each machine, and various methods were selected. Information concerning
the machines is summarized on the next page.
Salvage Useful Life Depreciation
Machine Acquired Cost Value in Years Method
1 1/1/05 $86,000 $ 6,000 10 Straight-line
2 1/1/06 100,000 10,000 8 Declining-balance
3 11/1/08 78,000 6,000 6 Units-of-activity
For the declining-balance method, the company uses the double-declining rate. For the units-ofactivity
method, total machine hours are expected to be 24,000. Actual hours of use in the first
3 years were: 2008, 1,000; 2009, 4,500; and 2010, 5,000.
Instructions
(a) Compute the amount of accumulated depreciation on each machine at December 31, 2008.
(b) If machine 2 had been purchased on April 1 instead of January 1, what would be the depreciation
expense for this machine in (1) 2006 and (2) 2007?
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