On January 1, 2010, 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: 2010, 20,000 hrs; 2011, 25,000 hrs; 2012, 15,000 hrs; 2013, 30,000 hrs; 2014, 10,000 hrs.
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.