At the beginning of 2015, your company buys a $36,000 piece of equipment that it

Question

At the beginning of 2015, your company buys a $36,000 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 4,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 48,000 units in 2015, 53,000 units in 2016, 54,000 units in 2017, and 45,000 units in 2018. Required: a. Determine the depreciable cost. Depreciable Cost b. Calculate the depreciation expense per year under the straight-line method. Depreciation Expense per year Depreciation Accumulated Net Book Year Expense Depreciation Value Acquisition cost 2015 2016 2018

Explanation / Answer

a) Depreciabale cost $32,000 original cost 36,000 less: residual value 4,000 Depreciable cost 32,000 b) Depreciation expense 8,000 (depreciable cost)/ useful life 32,000/4 c) Year Dep Accumulated Net book expense dep value cost 36,000 2015 8,000 8,000 28,000 2016 8,000 16,000 20,000 2017 8,000 24,000 12,000 2018 8,000 32,000 4,000 d) Depreciation rate per unit 0.16 (32000/200,000) 0.16 e) Year Dep Accumulated Net book expense dep value cost 36,000 2015 7,680 7,680 28,320 2016 8,480 16,160 19,840 2017 8,640 24,800 11,200 2018 7,200 32,000 4,000

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