Suppose FedEx purchased equipment on January 1, 20X7, for $44,000. The expected

Question

Suppose FedEx purchased equipment on January 1, 20X7, for $44,000. The expected useful life of the equipment is 10 years or 100,000 units of production, and its residual value is $4,000. Under 3 depreciation methods, the annual depreciation expense and the balance of accumulated depreciation at the end of 20X7 and 20X8 are as follows: Required: Identify the depreciation method used in each instance, and show the equation ans computation for each. (Round to the nearest dollar) Assume continued use of the same method through year 20X9. Determine the annual depreciation expense, accumulated depreciation, and book value of the equipment for 20X7 through 20X9 under each method, assuming 12, units of production in 20X9

Explanation / Answer

Answer:1) Method A: straight line

Depreciation cost=$44000-$4000=$40000

Each year=40000/10=$4000

Method B: Double declining balance

Rate=(1/10 years)*2=20%

2007=44000*20%=8800

2008=(44000-8800)*20%=7040

Method C:Units of Production

Dep per unit=($44000-$4000)/100000=0.40 per unit

2007=3000 units*0.40=1200

2008=14000 units*0.4=5600

Answer:2)

Method A: Straight line Year Annual dep exp Accu. Dep Book value start 44000 2007 4000 4000 40000 2008 4000 8000 36000 2009 4000 12000 32000

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