Machinery is purchased on july 1 of the current fiscal year for $240,000. it is expected to have a useful life of four years, or 25,000 operating hours, and a residual value of $15,000. compute the depreciation for the last six months of the current fiscal year ending december 31 by each of the following methods: a. straight-line $ 28,125 b. double-declining-balance $ c. units-of-activity (used for 1,600 hours during the current year) $

a. $28,125

b. $60,000

c. $14,400

Explanation:

The computation of the depreciation expense for the last six months is shown below:

a) Straight-line method:

= (Purchase value of machinery - residual value) ÷ (useful life)

= ($240,000 - $15,000) ÷ (4 years)

= ($225,000) ÷ (4 years)  

= $56,250

In this method, the depreciation is same for all the remaining useful life

So, for 6 months it would be

= $56,250 × 6 months ÷ 12 months

= $28,125

(b) Double-declining balance method:

First we have to find the depreciation rate which is shown below:

= One÷ useful life

= 1 ÷ 4

= 25%

Now the rate is double So, 50%

In year 1, the original cost is $240,000 so the depreciation is $60,000 after applying the 50% depreciation rate  and 6 months

(c) Units-of-production method:

= (Purchase value of machinery - residual value) ÷ (estimated operating hours)  

= ($240,000 - $15,000) ÷ (25,000 operating hours)

= ($225,000) ÷ (25,000 operating hours)  

= $9 per hour

Now for the current year, it would be  

= Estimated operating hours in the current year × depreciation per hour

= 1,600 hours × $9

= $14,400

Inventory turnover

Explanation:

Inventory turnover is the speed at which a business replaces its inventory due to selling activities.  The number of times that a business sells and replaces its inventory is expressed as a ratio known as the inventory turnover ratio.

A high inventory turnover rate attests that the business sells and replaces its inventory several times in a given year. A high inventory turnover rate indicates a high demand for a company's products. It indicates efficiency in managing stocks and the costs of holding inventory.