On June 15 201 1 a second hand machine was purchased

for 77 000 #2173

On June 15,201 1, 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 material and $800 for direct labour were paid in fine-tuning the controls. The machine has
an estimated residual value of $5,000 at the end of its five-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. Operating data for the next six fiscal years are provided below. The
company has an October 31 fiscal year end. Depreciation expense should be calculated to the
nearest half month.Instructions(a) Calculate the depreciation charges for each fiscal year under
each of the following depreciation methods. Where necessary, round depreciation rate per unit
to four decimal places.1. Straight-line method2. Activity method: based on output3. Activity
method: based on input4. Double-declining-balance method*5. CCA, Class 8, 20%(b) What is
the carrying amount of the machine on the October 31, 2014statementoffinancial position under
the first four methods above?(c) Compare your answers in (b) with the asset’s tax value at the
same date.(d) What happens if the actual hours of operation or units produced do not
correspond to the numbers that were estimated in setting the rate?View Solution:
On June 15 201 1 a second hand machine was purchased for 77 000

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