On January 1, 2017, a machine was purchased for $90,000. The machine has an estimated residual 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: 2017, 20,000 hours; 2018, 25,000 hours; 2019, 15,000 hours; 2020, 30,000 hours; and 2021, 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.