Question
Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates: Service life 5 years or 10,000 hours
Depreciation Methods
Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates:
| Service life | 5 years or 10,000 hours |
| Production | 180,000 units |
| Residual value | $ 18,000 |
In 2019, Gruman uses the machine for 2,000 hours and produces 40,000 units. In 2020, Gruman uses the machine for 1,200 hours and produces 30,000 units. If required, round your final answers to the nearest dollar.
Required:
- Compute the depreciation for 2019 and 2020 under each of the following methods:
- Straight-line method
2019 2020 - Sum-of-the-years'-digits method
2019 2020 - Double-declining-balance method
2019 2020 - Activity method based on hours worked
2019 2020 - Activity method based on units of output
2019 2020
- For each method, what is the book value of the machine at the end of 2019? At the end of 2020?
- Straight-line method
2019 2020 - Sum-of-the-years'-digits method
2019 2020 - Double-declining-balance method
2019 2020 - Activity method based on hours worked
2019 2020 - Activity method based on units of output
2019 2020
- If Gruman used a service life of 8 years or 15,000 hours and a residual value of $9,000 , what would be the effect on the following under the straight-line, sum-of-the-years'-digits, and double-declining-balance depreciation methods?
Depreciation expense
- Straight-line method
2019 2020 - Sum-of-the-years'-digits method
2019 2020 - Double-declining-balance method
2019 2020
Book value
- Straight-line method
2019 2020 - Sum-of-the-years'-digits method
2019 2020 - Double-declining-balance method
2019 2020
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Canadian Income Taxation Planning And Decision Making
Authors: Joan Kitunen, William Buckwold
17th Edition 2014-2015 Version
1259094332, 978-1259094330
