Sonic Corporation purchased and installed electronic payment equipment at its dr

Question

Sonic Corporation purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX, at a cost of $27,000. The equipment has an estimated residual value of $1,500. The equipment is expected to process 255,000 payments over its three-year useful life. Per year, expected payment transactions are 61,200, year 1; 140,250, year 2; and 53,550, year 3. Complete a depreciation schedule for each of the alternative methods. Straight-line(a) Units-of-production(b) Double-declining-balance(c)

Explanation / Answer

Cost of equipment 27000 Less:Salvage value 1500 Depreciable amount 25500 Life 3 years Annual Depreciation 8500 Rate of depreciation under SLM 33.33% Rate of dep under DDM 66.67% Payment processed 255000 Depreciation per $ 1 payment process 0.1 (25500/255000) Schedule of Depreciation under SLM: Year Depreciation expense Accumulated dep Book value at the end 1 8500 8500 18500 2 8500 17000 10000 3 8500 255000 1500 Schedule of Depreciation under Units of Production Year Units Dep rate Dep Accumulated Book value Processed Expense Dep at the end 1 61200 0.1 6120 6120 20880 2 140250 0.1 14025 20145 6855 3 53550 0.1 5355 25500 1500 Schedule of Depreciation under DDM: Year Dep Rate Dep Accumulated Bbook Value Expense Dep at the end 0 27000 1 66.67% 18000 18000 9000 2 66.67% 6000 24000 3000 3 66.67% 1500 25500 1500 (Bal. fig)

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