Depreciation by Three Methods; Partial Years Perdue Company purchased equipment

Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-activity method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar.

a. Straight-line method

b. Units-of-activity method

c. Double-declining-balance Method

Year Amount Year 1 $ Year 2 $ Year 3 $ Year 4 $

Explanation / Answer

Depreciable base = 270000-9000 = 261000

a) Straight line dep :

b) Unit of production

dep rate = 261000/18000 = 14.5 per hour

c) Double decline balance :

Year Amount Year 1 261000/3*9/12 = 65250 Year 2 261000/3 = 87000 Year 3 87000 Year 4 261000/3*3/12 = 21750

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