Problem- 1

On January 1, 2013, Hobart Mfg. Co. purchased a drill press at a cost of $36,000. The drill press is expected to last 10 years and have a residual value of $6,000. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2013 and 2014, 25,000 and 84,000 units, respectively, were produced.

Required:

1. Compute depreciation for 2013 and 2014 and the book value of the drill press at December 31, 2013 and 2014, assuming the straight-line method is used.

2. Compute depreciation for 2013 and 2014 and the book value of the drill press at December 31, 2013 and 2014, assuming the double-declining-balance method is used.

3. Compute depreciation for 2013 and 2014 and the book value of the drill press at December 31, 2013 and 2014, assuming the units-of-production method is used.

Problem - 2

Equipment costing $80,000 with a useful life of 10 years and a residual value of $8,000 has been

depreciated for 6 years by the straight-line method. Assume a fiscal year ending December 31.

(a)	What is the book value at the end of the sixth year of use?
(b)	If early in the seventh year it is estimated that the remaining useful life is 5 years (instead of 4) and the residual value is $6,000, what is the amount of depreciation for the seventh year?

Problem -3

Machinery is purchased on July 1 of the current fiscal year for $240,000. It is expected to have a useful

life of 4 years, or 25,000 operating hours, and a residual value of $15,000. Compute the depreciation for

the last six months of the current fiscal year ending December 31 by each of the following methods:

Answer- 3

(a)	straight-line
(b)	declining-balance at twice the straight-line rate
(c)	units-of-production (used for 1,600 hours during the current year)