Machine purchase/replacement is an integral component for the successful operations of a business. For operational efficiency, QN4 Limited decided to purchase a machine at the cost of $166 667 on credit. During this unit, we have learnt that estimating the life of newly purchased items is essential. The equipment is estimated with a useful life of eight years and a residual value of $5 333. It might be relevant to note that QN4 Limited prepared its financial statement on the 30^th day of each year. Note: Ignore the treatment of GST in this question.

Required: Calculate the amount of depreciation that needs to be adjusted on the 30^th day of June 2022 and 2023. For this calculation, use the following methods:

The straight-line depreciation method (2 marks)

ANSWER a):

Diminishing balance method (depreciation rate is 17%); (2 marks)

ANSWER b):

Units-of-production method. It is estimated that the machine can be used to run a total of 10 667 machine hours. For the first two years, the machine will run 1000 and 1333 machine hours each year. (3 marks)

ANSWER c):