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A schedule of machinery owned by Waterway Industries is presented below:

Total Cost Estimated Salvage Value Estimated Life in Years
Machine X $593000 $40000 14
Machine Y 816000 82000 10
Machine Z 301000 61000 6

Waterway computes depreciation by the composite method. The composite rate of depreciation (in percent) for these assets is :_________

a. 8.44.
b. 8.94.
c. 13.74.
d. 10.17.

Sagot :

Tundexiidn

Answer:

b. 8.94%

Explanation:

                     Cost       Salvage   Depreciable cost    Life      Depreciation

Machine X  593,000  40,000         553,000              14           39,500

Machine Y  816,000   82,000         734,000               10           73,400

Machine Z  301,000   61,000          240,000               6            40,000

                 1,710,000                       1,527,000                           152,900

Composite Rate = Total Depreciation/Total Cost

Composite Rate = 152,900 / 1,710,000

Composite Rate = 0.089415205

Composite Rate = 8.94%

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