Question
In recent years, Red Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of
In recent years, Red Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.
Machine | Acquired | Cost | Salvage Value | Useful Life (in years) | Depreciation Method | |||||
1 | Jan. 1, 2012 | $136,000 | $29,000 | 10 | Straight-line | |||||
2 | July 1, 2013 | 92,000 | 11,300 | 5 | Declining-balance | |||||
3 | Nov. 1, 2013 | 87,790 | 7,290 | 6 | Units-of-activity |
For the declining-balance method, Red Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 35,000. Actual hours of use in the first 3 years were: 2013, 800; 2014, 5,530; and 2015, 7,000.
Accumulated Depreciation at December 31:
Machine 1: 42,800
Machine 2: 65,504
Machine 3: 30,659
(A) If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2013? In 2014?
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