On January 15, 2016, a second hand machine was purchased for $77,000. Before being put into service, the equipment was overhauled at a cost of $5,200, and additional costs of $400 for direct labour and $800 for direct materials in fine tuning controls. The machine has an estimated residual value of $5,000 at the end of its 5 year useful life. The machine is expected to operate for 100,000 hours before it will be replaced and is expected to produce 1.2 million units in this time.
The company has an October 31st year end and depreciation is calculated to the nearest half month.
Operating data for the machine is provided below.
Year Hours of Operation Units produced
2016 10,000 110,000
2017 20,000 270,000
2018 20,000 264,000
2019 20,000 310,000
2020 18,000 134,000
2021 12,000 112,000
Required:
1. Calculate the depreciation charges for each fiscal year under each of the following depreciation methods:
a. Straight - line
b. Declining balance at 40%
c. Activity method - based on units produced
2. What is the carrying value of the machine of October 31, 2019 statement of financial position under each method above.