Mark bought equipment on 1/2/18 for 18000 the equipment is expected to remain in

Question

Mark bought equipment on 1/2/18 for 18000 the equipment is expected to remain in service for 4 years and operate for 3750 hours at the end of its useful life it will have a residual value of 3000 the equipment operates for 375 hours the first year and 1125 hours the second year 1500 hours the third and 750 hours the fourth year prepare a schedule of deprecation expense accumulated deprecation and book value per year for the equipment under 3 depreciation methods straight line units of production and double declining

Explanation / Answer

Cost = 18,000

Useful life = 4 years

Residual value = 3,000

STRAIGHT LINE METHOD

Depreciation under Straight line method = (cost - residual value) / useful life

= (18,000 - 3,000) / 4

= 3,750

UNITS OF PRODUCTION METHOD

Depreciation under units of production method = (cost - residual value) * hours this year / total estimated hours

DOUBLE DECLINING BALANCE METHOD

Depreciation under Double declining balance method = (cost-accumulated depreciation)/useful life*2

* Depreciation in the year 3 = [(18,000-13,500)/4*2] = 2,250

* Deprecition cannot be made below the salvage value. So depreciation expense in the year 3 is limited to 1,500. No deprecition expense will be recorded in the year 4.

Year Cost Depreciation expense Accumulated depreciation Book value 1 18,000 3,750 3,750 14,250 2 18,000 3,750 7,500 10,500 3 18,000 3,750 11,250 6,750 4 18,000 3,750 15,000 3,000

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