Cost of Asset and Depreciation Method
Response to the following problem:
The Heist Company purchased a machine on January 2, 2010 and uses the 150%-declining-balance depreciation method. The machine has an expected life of 10 years and an expected residual value of $5,000.
The following costs relate to the acquisition and use of the machine during the first year of its operations:
|
Invoice price
|
$50,000
|
Testing
|
$ 1,100
|
|
Discounts available and taken
|
1,000
|
Normal spoilage of materials during
|
|
|
Freight
|
700
|
the year
|
750
|
|
Installation
|
900
|
Abnormal spoilage of materials
|
|
|
|
|
during the year
|
250
|
|
|
|
Wages of machine operator
|
15,000
|
Required
Compute the depreciation expense for 2010 and 2011.