Practice Exam - Chapter 8
Reporting & Analyzing Long-Term Assets
Dr. Fred Barbee
Solution to Short-Problem #2
|
ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 8 Reporting & Analyzing Long-Term Assets Dr. Fred Barbee Solution to Short-Problem #2 |
|
Short Problem #2
A company purchased a machine on January of the current year for $1,500,000. Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 40,000 hours, with a salvage value of $150,000). During the machine's 5-year life its hourly usage was: 4,000; 8,000; 16,000; 10,000; and 2,000 hours.
| Year | Straight-Line | Units-of- Production |
Double-Declining -Balance |
| Year 1 | $270,000 | $135,000 | $600,000 |
| Year 2 | 270,000 | 270,000 | 360,000 |
| Year 3 | 270,000 | 540,000 | 216,000 |
| Year 4 | 270,000 | 337,500 | 129,600 |
| Year 5 | 270,000 | 67,500 | 44,400 |
| Totals | $1,350,000 | $1,350,000 | $1,350,000 |