Depreciation by Three Methods; Partial Years Razar Sharp Company purchased equip

Question

Depreciation by Three Methods; Partial Years Razar Sharp Company purchased equipment on July 1, 2012, for $93,420. The equipment was expected to have a useful life of three years, or 6,480 operating hours, and a residual value of $2,700. The equipment was used for 1,200 hours during 2012, 2,300 hours in 2013, 1,900 hours in 2014, and 1,080 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

Explanation / Answer

(a) Straight Line Method

Depreciation in each of the year = ($93,420-2,700)/3 = $30,240

Depreciation in 2012 = $30,240/2 = $15,120 (for 6-months)

Depreciation in 2013 = $30,240

Depreciation in 2014 = $30,240

Depreciation in 2015 = $15,120 (for 6-month)

(b) Units of Output Method

In 2012 = (93,420-2,700) * (1200/6480) = $16,800

In 2013 = (93,420-2,700) * (2300/6480) = $32,200

In 2014 = (93,420-2,700) * (1900/6480) = $26,600

In 2015 = (93,420-2,700) * (1080/6480) = $15,120

(c) Double Declining

In 2012 = $93,420*33.33% = $31,140

In 2013 = $62,280*66.67% = $41,520

In 2014 = $20,760*66.67% = $13,840

In 2015 = $6,920*33.33% = $2,307

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