On January 1, 2022, Windsor Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $43,500. Related expenditures also paid in cash included: sales tax $3,550, shipping costs $150, insurance during shipping $50, installation and testing costs $100, and $200 of oil and lubricants to be used with the machinery during its first year of operations. Windsor estimates that the useful life of the machine is 5 years with a $5,250 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. Machine B: The recorded cost of this machine was $180,000. Windsor estimates that the useful life of the machine is 4 years with a $16,800 salvage value remaining at the end of that time period. Calculate the amount of depreciation expense that Windsor should record for Machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. 2,125.) (1) Windsor uses the straight-line method of depreciation. (2) Windsor uses the declining-balance method. The rate used is twice the straight-line rate. (3) Windsor uses the units-of-activity method and estimates that the useful life of the machine is 102,000 units. Actual usage is as follows: 2022, 43,000 units; 2023, 30,000 units; 2024, 17,000 units; and 2025, 12,000 units.
On January 1, 2022, Windsor Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $43,500. Related expenditures also paid in cash included: sales tax $3,550, shipping costs $150, insurance during shipping $50, installation and testing costs $100, and $200 of oil and lubricants to be used with the machinery during its first year of operations. Windsor estimates that the useful life of the machine is 5 years with a $5,250 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. Machine B: The recorded cost of this machine was $180,000. Windsor estimates that the useful life of the machine is 4 years with a $16,800 salvage value remaining at the end of that time period. Calculate the amount of depreciation expense that Windsor should record for Machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. 2,125.) (1) Windsor uses the straight-line method of depreciation. (2) Windsor uses the declining-balance method. The rate used is twice the straight-line rate. (3) Windsor uses the units-of-activity method and estimates that the useful life of the machine is 102,000 units. Actual usage is as follows: 2022, 43,000 units; 2023, 30,000 units; 2024, 17,000 units; and 2025, 12,000 units.
Chapter10: Project Cash Flows And Risk
Section: Chapter Questions
Problem 4PROB
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Question
On January 1, 2022, Windsor Company purchased the following two machines for use in its production process.
Machine A: | The cash price of this machine was $43,500. Related expenditures also paid in cash included: sales tax $3,550, shipping costs $150, insurance during shipping $50, installation and testing costs $100, and $200 of oil and lubricants to be used with the machinery during its first year of operations. Windsor estimates that the useful life of the machine is 5 years with a $5,250 salvage value remaining at the end of that time period. Assume that the straight-line method of |
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Machine B: | The recorded cost of this machine was $180,000. Windsor estimates that the useful life of the machine is 4 years with a $16,800 salvage value remaining at the end of that time period. |
Calculate the amount of depreciation expense that Windsor should record for Machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. 2,125.)
(1) | Windsor uses the straight-line method of depreciation. | |
(2) | Windsor uses the declining-balance method. The rate used is twice the straight-line rate. | |
(3) | Windsor uses the units-of-activity method and estimates that the useful life of the machine is 102,000 units. Actual usage is as follows: 2022, 43,000 units; 2023, 30,000 units; 2024, 17,000 units; and 2025, 12,000 units. |
Depreciation Expense
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2023
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2024
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2025
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Straight-line method
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$enter a dollar amount | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount | ||||
Declining-balance method
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$enter a dollar amount | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount | ||||
Units-of-activity method
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$enter a dollar amount | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount |
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