On January 1, 2023, a machine was purchased for $90,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 5 years. The machine can operate for 100,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2023, 20,000 hours; 2024, 25,000 hours; 2025, 15,000 hours; 2026, 30,000 hours; and 2027, 10,000 hours.

Instructions

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.

b. Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods.

1. Straight-line method. 

2. Sum-of-the-years’-digits method.

3. Double-declining-balance method.