At the beginning of 2015, your company buys a $31,600 piece of equipment that it
ID: 2464269 • Letter: A
Question
At the beginning of 2015, your company buys a $31,600 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: 44,000 units in 2015, 52,000 units in 2016, 48,000 units in 2017, and 56,000 units in 2018. Required: Determine the depreciable cost. Depreciable Cost________________Calculate the depreciation expense per year under the straight-line method. Use the straight-line method to prepare a depreciation schedule. Calculate the depreciation rate per unit under the units-of-production method. (Round your answer to 2 decimal places.) Depreciation Rate Per Unit_______________Use the units-of-production method to prepare a depreciation schedule. (Do not round your Depreciation rate per unit.)Explanation / Answer
a) Depreciable cost = Asset total cost – residual value
= $ 31600 - $4000
= $27600
b) Depreciation expense per year under straight line method = depreciable cost / total life of asset
= $27600 / 4
= $ 6900
c) Straight line method depreciation schedule
Year
Depreciation expense
Accumulated depreciation
Net book value
Acquisition cost
31600
2015
6900
6900
24700
2016
6900
13800
17800
2017
6900
20700
10900
2018
6900
27600
4000 residual value
d) Depreciation expense per year under unit of production method = Depreciable cost / total expected production
= $27600 / 200000 units
= $ 0.138 per unit
e)
Year
Depreciation expense
Accumulated depreciation
Net book value
Acquisition cost
31600
2015
= 0.138 * 44000
= $6072
6072
25528
2016
= 0.138 * 52000
= 7176
13248
18352
2017
= 0.138 * 48000
= 6624
19872
11728
2018
= 0.138 * 56000
= 7728
27600
4000
Year
Depreciation expense
Accumulated depreciation
Net book value
Acquisition cost
31600
2015
6900
6900
24700
2016
6900
13800
17800
2017
6900
20700
10900
2018
6900
27600
4000 residual value
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