Jupiter Wells Corp. purchased machinery for $315,000 on May 1, 2013. It is estimated that it will have a useful life of 10 years, residual value of $15,000, production of 240,000 units, and 25,000 working hours. During 2014, Jupiter Wells Corp. used the machinery for 2,650 hours and the machinery produced 25,500 units.
Instructions
From the information given, calculate the depreciation charge for 2014 under each of the following methods, assuming Jupiter has a December 31 year end.
(a) Straight-line
(b) Units-of-production
(c) Working hours
(d) Declining-balance, using a 20% rate
(e) Sum-of-the-years'-digits
(f) CCA at 20%
(g) Assume that Jupiter Wells is a small privately owned company that follows ASPE. From the perspective of a potential investor in Jupiter Wells, discuss the advantages and disadvantages of Jupiter Wells using the capital cost allowance approach to calculate and record depreciation expense for financial reporting purposes.