Jupiter Wells Corp. purchased machinery for $315,000 on May 1, 2020. 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. The machinery will have a physical life of 15 years and a salvage value of $3,000. During 2021, Jupiter Wells Corp. used the machinery for 2,650 hours and the machinery produced 25,500 units. Jupiter Wells prepares financial statements in accordance with IFRS.

Instructions

From the information given, calculate the depreciation charge for 2021 under each of the following methods, assuming Jupiter Wells has a December 31 year end.

a. Straight-line

b. Units of production. Round the units of production charge to the nearest cent and the final answer to the nearest dollar.

c. Working hours. Round the per-hour charge to the nearest cent and the final answer to the nearest dollar.

d. Declining-balance, using a 20% rate

e. Sum-of-the-years’-digits. Do not round intermediate calculations and round the final answer to the nearest dollar.

f. CCA at 20%

g. Assume that Jupiter Wells is a small privately owned company that follows ASPE and uses straightline depreciation. How would depreciation expense differ, if at all? Provide calculations to support your answer.

h. Digging Deeper Assuming that Jupiter Wells follows ASPE, from the perspective of a potential investor in the company, discuss the advantages and disadvantages of Jupiter Wells using the capital cost allowance approach to calculate and record depreciation expense for financial reporting purposes.