There are four problems. Each one is worth the score indicated next to the probl

Question

There are four problems. Each one is worth the score indicated next to the problem number. Show all work for complete credit. You may attach extra pages if you so desire. Please be NEAT when writing your answers. I cannot grade illegible answers. Problems portion of the test is worth a total of 30 points. Brenan, Inc. purchased equipment at the beginning of 2004 for $2,100,000. Brenan The equipment has an estimated residual value (salvage value) of $100,000 and an estimated life of 5 years or 100,000 hours of operation. The machinery was operated for 15,000 hours in 2004, 20,000 hours in 2005, 35,000 hours in 2006, 20,000 hours in 2007, and 10,000 hours in 2008. Create a depreciation schedule for each of the following depreciation methods for the years 2004 to 2008: Straight-line depreciation method Units-of-production method Double-declining-balance depreciation method Straight-Line Units-of-Production Double-Declining Balance

Explanation / Answer

a) Straight Line Method: Straight line depreciation rate = 2100000 - 100000 = 2000000 / 5 = $400,000

a) Units of Production:

c. Double-Declining Balance:

Straight line depreciation rate = 400,000 / 2,000,000 20%, so Double Declining depreciation rate is 40%

Date Cost Book Value (Beginning) Depreciation Expense Accumulated Depreciation Book Value (Ending) 2004 $2,100,000 2,100,000 400,000 400,000 1,700,000 2005 1,700,000 400,000 800,000 1,300,000 2006 1,300,000 400,000 1,200,000 900,000 2007 900,000 400,000 1,600,000 500,000 2008 500,000 400,000 2,000,000 100,000

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