In 2016, Gruman uses the machine for 1,700 hours and produces 40,000 units. In 2017, Gruman uses the machine for 1,200 hours and produces 34,000 units. If required, round your final answers to the nearest dollar. Required: Compute the depreciation for 2016 and 2017 under each of the following methods:

Answer is explained in the explanation section below.

Explanation:

Note: This question is not complete and lacks necessary data and requirements to solve. However, I have found a similar question on the internet and will be using its data to solve for this question. Furthermore, it has not given the name of methods, so I will be solving for two methods, which are:

1. Straight Line Method

2. Sum of the years depreciation Method.

Solution:

Data Missing:

Machine Price = $198,000

Service Life = 5 years or 10,000 hours

Production = 180,000 units

Residual Value = $18000

Now, the data is complete and can be solved for the above mentioned methods of depreciation.

1. Straight Line Method:

As we know,

Asset Cost = $198,000

Residual Value = $18000

Life in Years = 5

Depreciation:

Formula for Straight Line Depreciation is:

(Asset Cost - Residual Value)/life in years

Plugging in the values:

Depreciation = ($198,000 - $18000)/5

Depreciation = $180,000/5

Depreciation = 36000

It will be same for both the years 2016 and 2017 as well.

2. Sum of the years Depreciation Method:

For this, we need to have the depreciable asset value:

Depreciable Asset Value = (Asset Value - Residual Value)

Depreciable Asset Value = ($198,000 - $18000)

Depreciable Asset Value = $180,000

Sum of the years for 2016

Number of years for 2016 = 5

Sum = 5 + 4 + 3 + 2 + 1 = 15

Number of years for 2017 = 4

So, the formula for depreciation is:

(Number of years for 2016/Sum of Years) x depreciable Asset Value

(5/15) x 180,000 = 60,000

Similarly, for 2017

(Number of years for 2017/Sum of Years) x depreciable Asset Value

(4/15) x 180,000 = 48,000

Hence,

1. Straight Line Method:

Depreciation for 2016  = 36000

Depreciation for 2017  = 36000

2. Sum of the years Depreciation Method:

Depreciation for 2016  = 60,000

Depreciation for 2017  = 48,000