E11-4 (Depreciation Computations—Five Methods)

E11-4 (Depreciation Computations—Five Methods)

E11-4 (Depreciation Computations—Five Methods) Wenner Furnace Corp. purchased machinery for $279,000 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,000. During 2013, Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.



a. $279,000 – $15,000 = $264,000; $264,000 ÷ 10 yrs. = $26,400
b. $264,000 ÷ 240,000 units = $1.10; 25,500 units X $1.10 = $28,050
c. $264,000 ÷ 25,000 hours = $10.56 per hr.; 2,650 hrs. X $10.56 = $27,984
d. 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 OR
n(n + 1) = 10(11) 55
"10 X $264,000 X 1/3 = $16,000
55  
"
9 X $264,000 X 2/3 = 28,800
55
Total for 2013 $44,800
e. $279,000 X 20% X 1/3 = $18,600
[$279,000 – ($279,000 X 20%)] X 20% X 2/3 =   29,760
Total for 2013 $48,360
E11-8 Goldman Corporation bought a machine on June 1, 2010, for $31,800, f.o.b. the place of manufacture. Freight to the point where it was set up was $200, and $500 was expended to install it. The machine’s useful life was estimated at 10 years, with a salvage value of $2,500. On June 1, 2011, an essential part of the machine is replaced, at a cost of $2,700, with one designed to reduce the cost of operating the machine. The cost of the old part and related depreciation cannot be determined with any accuracy. On June 1, 2014, the company buys a new machine of greater capacity for $35,000, delivered, trading in the old machine which has a fair value and trade-in allowance of $20,000. To prepare the old machine for removal from the plant cost $75, and expenditures to install the new one were $1,500. It is estimated that the new machine has a useful life of 10 years, with a salvage value of $4,000 at the end of that time. The exchange has commercial substance.








Old Machine
"June 1, 2008





"...

View Full Essay