Search x V Shop x The int x IT Solveo X b The inl x Solvex BMRXX + oks/9781119254027/cfi/702/4/4@0.00:32.3 Which method would you recommend? Explain. P11-3 On June 15, 2014, a second-hand machine was purchased for $77,000. Before being put into service, the equip- ment was overhauled at a cost of $5,200, and additional costs of $400 for direct material and $800 for direct labour were paid in fine-tuning the controls. The machine has an estimated residual value of $5,000 at the end of its five-year useful life. The machine is expected to operate for 100,000 hours before it will be replaced and is expected to produce 1.2 million units in this time. Operating data for the next six fiscal years are provided below. The company has an October 31 fiscal year end. Depreciation expense should be calculated to the nearest half month. Year Hours of Operation Units Produced 2014 10,000 110,000 2015 20,000 270,000 2016 20,000 264,000 2017 20,000 310,000 2018 18,000 134,000 2019 12.000 112,000 I TAXATION Instructions (a) Calculate the depreciation charges for cach fiscal year under each of the following depreciation methods. Where necessary, round depreciation rate per unit to four decimal places. 1. Straight-line method 2. Activity method: based on output 3. Activity method: based on input 4. Double-declining-balance method *5. CCA, Class 8, 20% (b) What is the carrying amount of the machine on the October 31, 2017 statement of financial position under the first four methods above? (c) Compare your answers in (b) with the asset's tax plushe same date. Search (d) Which method would the company's management order to minimize taxes in 2014? (e) What happens if the actual hours of operation or units produced do not correspond to the numbers that were estimated in setting the rate? P11-4 Comco Tool Corp. records depreciation annually at the end of the year. Its policy is to take a full year's depre- ciation on all assets that are used throughout the year and depreciation for half a year on all machines that are acquired DIGGING DEEPER Search x V Shop x The int x IT Solveo X b The inl x Solvex BMRXX + oks/9781119254027/cfi/702/4/4@0.00:32.3 Which method would you recommend? Explain. P11-3 On June 15, 2014, a second-hand machine was purchased for $77,000. Before being put into service, the equip- ment was overhauled at a cost of $5,200, and additional costs of $400 for direct material and $800 for direct labour were paid in fine-tuning the controls. The machine has an estimated residual value of $5,000 at the end of its five-year useful life. The machine is expected to operate for 100,000 hours before it will be replaced and is expected to produce 1.2 million units in this time. Operating data for the next six fiscal years are provided below. The company has an October 31 fiscal year end. Depreciation expense should be calculated to the nearest half month. Year Hours of Operation Units Produced 2014 10,000 110,000 2015 20,000 270,000 2016 20,000 264,000 2017 20,000 310,000 2018 18,000 134,000 2019 12.000 112,000 I TAXATION Instructions (a) Calculate the depreciation charges for cach fiscal year under each of the following depreciation methods. Where necessary, round depreciation rate per unit to four decimal places. 1. Straight-line method 2. Activity method: based on output 3. Activity method: based on input 4. Double-declining-balance method *5. CCA, Class 8, 20% (b) What is the carrying amount of the machine on the October 31, 2017 statement of financial position under the first four methods above? (c) Compare your answers in (b) with the asset's tax plushe same date. Search (d) Which method would the company's management order to minimize taxes in 2014? (e) What happens if the actual hours of operation or units produced do not correspond to the numbers that were estimated in setting the rate? P11-4 Comco Tool Corp. records depreciation annually at the end of the year. Its policy is to take a full year's depre- ciation on all assets that are used throughout the year and depreciation for half a year on all machines that are acquired DIGGING DEEPER