On January 1st, 2017, Sands Company purchased a construction lathe at a cost of $625,000. It was estimated that the machine would have a useful

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On January 1st, 2017, Sands Company purchased a construction lathe at a cost of $625,000. It was estimated that the machine would have a useful life of 25 years, and a residual value at the end of its useful life of $25,000. Statistics relating to the machine over its useful life are as follows:

Estimated service life under various scenarios:

In years 25

Total Estimated Output in units 300,000

Total Estimated Working Hours 50,000

Actual operation for the first five years of the asset's life produced the following number of units of output and ran for the following number of hours:

Year Units of Output Working Hours

2017 9,750 1,550

2018 11,250 2,150

2019 13,500 2,650

2020 10,000 1,850

2021 11,500 2,300

Required:

1. Calculate the depreciation expense amounts for the year 2018 under each of the following methods of recognizing depreciation. Assume Sands has a December 31st year-end. (22 marks)

a) Straight line (3 marks)

b) Units of output; In 2018 the lathe produced 11,250 units as shown above. Round the units of production charge to the nearest cent. (4 marks)

c) Working hours: the lathe ran for 2,150 hours in 2018 - as per above. Round the per-hour charge to the nearest cent. (4 marks)

d) Sum-of-the-year's-digits; (use the formula SYD to calculate the denominator) (5 marks)

e) Double declining balance at twice the straight-line rate (round resulting calculation to two decimal points). (6 marks