Depreciation by Three Methods; Partial Years Layton Company purchased tool sharp
ID: 2402633 • Letter: D
Question
Depreciation by Three Methods; Partial Years Layton Company purchased tool sharpening equipment on October 1 for $108,000. The equipment was expected to have a useful life of three years, or 12,000 operating hours, and a residual value of $7,200. The equipment was used for 1,350 hours during Year 1, 4,200 hours in Year 2, 3,650 hours in Year 3, and 2,800 hours in Year 4 Required Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of- output method, and (c) the double-declining-balance method Note: FOR DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar a. Straight-line method Year Year 1 Year 2 Year 3 Year 4 Amount 8,400V 33,600 V 33,600 V 25,200 V b. Units-of-output method Year Year 1 Year 2 Amount 11,340 35,280 VExplanation / Answer
Answers
Working
A
Cost
$ 108,000.00
B
Residual Value
$ 7,200.00
C=A - B
Depreciable base
$ 100,800.00
D
Life [in years]
3
E=C/D
Annual SLM depreciation
$ 33,600.00
F=E/C
SLM Rate
33.33%
G=F x 2
DDB Rate
66.67%
Working for Yearly depreciation
Year
Beginning Book Value
Depreciation rate
Depreciation expense
Ending Book Value
1
$ 108,000.00
66.67%
$ 72,000.00
$ 36,000.00
2
$ 36,000.00
66.67%
$ 24,000.00
$ 12,000.00
3
$ 12,000.00
66.67%
$ 4,800.00
$ 7,200.00
Year
Depreciation calculated above
From Oct - Dec [3 months]
From Jan - Sept [9 months]
[A, as calculated above]
[B = A x 3/12]
[C = A x 9/12]
1
? 72,000.00
$ 18,000.00
$ 54,000.00
2
? 24,000.00
$ 6,000.00
$ 18,000.00
3
? 4,800.00
$ 1,200.00
$ 3,600.00
------Answer values, including working
Year
From Jan - Sept [9 months]
From Oct - Dec [3 months]
Total [Answer column]
[A]
[B]
[A + B]
1
$ -
$ 18,000.00
$ 18,000.00
2
$ 54,000.00
$ 6,000.00
$ 60,000.00
3
$ 18,000.00
$ 1,200.00
$ 19,200.00
4
$ 3,600.00
$ 3,600.00
A
Cost
$ 108,000.00
B
Residual Value
$ 7,200.00
C=A - B
Depreciable base
$ 100,800.00
D
Life [in years]
3
E=C/D
Annual SLM depreciation
$ 33,600.00
F=E/C
SLM Rate
33.33%
G=F x 2
DDB Rate
66.67%
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