The cost of equipment purchased by Charleston, Inc., on June 1, 2012, is $89,000. It is estimated

Question:

The cost of equipment purchased by Charleston, Inc., on June 1, 2012, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years; its total working hours are estimated at 42,000; and its total production is estimated at 525,000 units. During 2012, the machine was operated 6,000 hours and produced 55,000 units. During 2013, the machine was operated 5,500 hours and produced 48,000 units.

Instructions

Compute depreciation expense on the machine for the year ending December 31, 2012, and the year ending December 31, 2013, using the following methods.

(a) Straight-line.

(b) Units-of-output.

(d) Sum-of-the-years’-digits.

(e) Declining-balance (twice the straight-line rate).

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...