Depreciation by Three Methods; Partial Years Razar Sharp Company purchased equip
ID: 2475113 • Letter: D
Question
Depreciation by Three Methods; Partial Years
Razar Sharp Company purchased equipment on July 1, 2012, for $52,650. The equipment was expected to have a useful life of three years, or 3,780 operating hours, and a residual value of $1,620. The equipment was used for 700 hours during 2012, 1,300 hours in 2013, 1,100 hours in 2014, and 680 hours in 2015.
Required:
Determine the amount of depreciation expense for the years ended December 31, 2012, 2013, 2014, and 2015, 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 multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.
a. Straight-line method
b. Units-of-output method
c. Double-declining-balance method
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Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation.
Annual units-of-output depreciation allocates the cost of the asset equally over the units produced (hours).
The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero.
Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method.
Learning Objective 2.
Depreciation by Three Methods; Partial Years
Razar Sharp Company purchased equipment on July 1, 2012, for $52,650. The equipment was expected to have a useful life of three years, or 3,780 operating hours, and a residual value of $1,620. The equipment was used for 700 hours during 2012, 1,300 hours in 2013, 1,100 hours in 2014, and 680 hours in 2015.
Required:
Determine the amount of depreciation expense for the years ended December 31, 2012, 2013, 2014, and 2015, 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 multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.
a. Straight-line method
Year Amount 2012 $ 2013 $ 2014 $ 2015 $b. Units-of-output method
Year Amount 2012 $ 2013 $ 2014 $ 2015 $c. Double-declining-balance method
Year Amount 2012 $ 2013 $ 2014 $ 2015 $Explanation / Answer
a.Straight-line method:
Depreciation p.a = Cost of Asset- Salvage Value/ Life of Asset
=$52,650-$1,620/3
=$51,030/3
=$17,010
b) Units-of-output method
Depreciation per unit = Cost of Asset- Salvage Value/ expected no of operating hours
=$52,650-$1,620/3,780
=$51,030/3,780
=$13.50
c. Double-declining-balance method
Depreciation % under Straight-line method =1/ years = 33.33%
Depreciation % under Double decline method =2 x Depreciation % under Straight-line method
=2 x 33.33% =66.667%
Straight Line Method
Year
Book Value of Beg yr
Annual Dep
Accu Depr
Ending Book Value
2012
52,650
8,505
8,505
44,145
2013
44,145
17,010
25,515
27,135
2014
27,135
17,010
42,525
10,125
2015
10,125
8,505
51,030
1,620
Double Declining Method
Year
Book Value of Beg yr
Dep Rate
=
Annual Dep
Accu Depr
Book Value
2012
52,650
33
=
17,550
17,550
35,100
2013
35,100
67
=
23,400
40,950
11,700
2014
11,700
67
=
7,800
48,750
3,900
2015
3,900
33
=
2,280
51,030
1,620
Units-of-output method
Year
Book Value of Beg yr
Dep per hr
No of Hrs worked
Annual Dep
Accu Depr
Book Value
2012
52,650
13.50
700
9,450
9,450
43,200
2013
43,200
13.50
1300
17,550
27,000
25,650
2014
25,650
13.50
1100
14,850
41,850
10,800
2015
10,800
13.50
680
9,180
51,030
1,620
Straight Line Method
Year
Book Value of Beg yr
Annual Dep
Accu Depr
Ending Book Value
2012
52,650
8,505
8,505
44,145
2013
44,145
17,010
25,515
27,135
2014
27,135
17,010
42,525
10,125
2015
10,125
8,505
51,030
1,620
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