DeliciousDelicious Fried Chicken bought equipment on JanuaryJanuary 22?, 2016201
ID: 2436345 • Letter: D
Question
DeliciousDelicious
Fried Chicken bought equipment on
JanuaryJanuary
22?,
20162016?,
for
$ 27 comma 000$27,000.
The equipment was expected to remain in service for four years and to perform
4 comma 2004,200
fry jobs. At the end of the? equipment's useful? life,
DeliciousDelicious
estimates that its residual value will be
$ 6 comma 000.$6,000.
The equipment performed
420420
jobs the first? year,
1 comma 2601,260
the second? year,
1 comma 6801,680
the third? year, and
840840
the fourth year.
Requirements
1.
Prepare a schedule of depreciation? expense, accumulated? depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. ?Note: Three depreciation schedules must be prepared.
2.
Which method tracks the wear and tear on the equipment most? closely?
Requirement 1. Prepare a schedule of depreciation? expense, accumulated? depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. ?Note: Three depreciation schedules must be prepared.
Begin by preparing a depreciation schedule using the? straight-line method.
Straight-Line Depreciation Schedule
Depreciation for the Year
Asset
Depreciable
Depreciation
Depreciation
Accumulated
Book
Date
Cost
Cost
Rate
Expense
Depreciation
Value
1-2-2016
12-31-2016
/
=
12-31-2017
/
=
12-31-2018
/
=
12-31-2019
/
=
Before completing the? units-of-production depreciation? schedule, calculate the depreciation expense per unit.
(
-
) /
=
Depreciation per unit
(
-
) /
=
Prepare a depreciation schedule using the? units-of-production method.
Units-of-Production Depreciation Schedule
Depreciation for the Year
Asset
Depreciation
Number of
Depreciation
Accumulated
Book
Date
Cost
Per Unit
Units
Expense
Depreciation
Value
1-2-2016
12-31-2016
x
=
12-31-2017
x
=
12-31-2018
x
=
12-31-2019
x
=
Prepare a depreciation schedule using the? double-declining-balance (DDB) method. ?(Enter a? "0" for any items with a zero? value.)
Double-Declining-Balance Depreciation Schedule
Depreciation for the Year
Asset
Book
DDB
Depreciation
Accumulated
Book
Date
Cost
Value
Rate
Expense
Depreciation
Value
1-2-2016
12-31-2016
x
=
12-31-2017
x
=
12-31-2018
=
12-31-2019
=
Requirement 2. Which method tracks the wear and tear on the equipment most? closely?
The
?
double-declining-balance
straight-line
units-of-production
method tracks wear and tear most closely.
1.
Prepare a schedule of depreciation? expense, accumulated? depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. ?Note: Three depreciation schedules must be prepared.
2.
Which method tracks the wear and tear on the equipment most? closely?
Explanation / Answer
Answer:
1
Straight-Line Depreciation Schedule
Straight-Line Depreciation Schedule
Depreciation for the Year
Asset
Depreciable
Depreciation
Depreciation
Accumulated
Book
Date
Cost
Cost
Rate
Expense
Depreciation
Value
1/2/2016
27000
27000
12/31/2016
21000
/
4 Years
=
5250
5250
21750
12/31/2017
21000
/
4 Years
=
5250
10500
16500
12/31/2018
21000
/
4 Years
=
5250
15750
11250
12/31/2019
21000
/
4 Years
=
5250
21000
6000
Before completing the units of production depreciation schedule, calculate the depreciation expense per unit
Cost
-
Residual value
) /
=
Depreciation per unit
( 27000
-
6000
) / 4200
5
Prepare a depreciation schedule using the? units-of-production method.
Units-of-Production Depreciation Schedule
Depreciation for the Year
Asset
Depreciation
Number of
Depreciation
Accumulated
Book
Date
Cost
Per Unit
Units
Expense
Depreciation
Value
1/2/2016
27000
27000
12/31/2016
5
x
420
=
2100
2100
24900
12/31/2017
5
x
1260
=
6300
8400
18600
12/31/2018
5
x
1680
=
8400
16800
10200
12/31/2019
5
x
840
=
4200
21000
6000
Prepare a depreciation schedule using the double declining balance (DDB) method.
Double-Declining-Balance Depreciation Schedule
Depreciation for the Year
Asset
Book
DDB
Depreciation
Accumulated
Book
Date
Cost
Value
Rate
Expense
Depreciation
Value
1/2/2016
27000
27000
12/31/2016
27000
x
2 x (1/4)
=
13500
13500
13500
12/31/2017
13500
x
2 x (1/4)
=
6750
20250
6750
12/31/2018
=
750
21000
6000
12/31/2019
=
________________________________________________________________
Requirement 2
Which method tracks the wear and tear on the equipment most closely?
Answer:
The units of production method tracks wear and tear most closely.
Straight-Line Depreciation Schedule
Depreciation for the Year
Asset
Depreciable
Depreciation
Depreciation
Accumulated
Book
Date
Cost
Cost
Rate
Expense
Depreciation
Value
1/2/2016
27000
27000
12/31/2016
21000
/
4 Years
=
5250
5250
21750
12/31/2017
21000
/
4 Years
=
5250
10500
16500
12/31/2018
21000
/
4 Years
=
5250
15750
11250
12/31/2019
21000
/
4 Years
=
5250
21000
6000
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