Depreclation by Three Methods; Partial Years Perdue Company purchased equip ent

Question

Depreclation by Three Methods; Partial Years Perdue Company purchased equip ent on April 1 for $24,570 The ego e t was expected to have a user ile o, tree yen o. no operacing nen, and asidual value or sa o m e equipment was used for 800 hours during Year 1, 1,500 hours in Year 2, 1,300 hours in Year 3, and 720 hours in Year 4. 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 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 Year 1 Year 2 Year 3 Year 4 Amount b. Units-of-output method Year Year 1 Year 2 Year 3 Year 4 Ameunt c. Double-decining-balance method Year Year 2 Year 3 rear 4

Explanation / Answer

Ans.a Straight-line method: Year Amount 1 5940 (for 9 months) 2 7920 3 7920 4 1980 (for 3 months) Total 23760 *Calculation: Depreciation (annually) = (Cost of assets - salvage value) / Life of assets (24570 - 810) / 3 7920 *The calculation of first year depreciation is for 9 months ( April to december) *The calculation of fourth year depreciation is for 3 months ( Jan to April) Ans.b Units of output method: Year Amount 1 4400 2 8250 3 7150 4 3960 Total 23760 *Calculation: Year Amount 1 (24570 - 810) / 4320 * 800 2 (24570 - 810) / 4320 * 1500 3 (24570 - 810) / 4320 * 1300 4 (24570 - 810) / 4320 * 720 Ans.c Double declining balance method: Year Amount 1 12286 2 8190 3 2729 4 555 Total 23760 *Calculation: Double declining rate = 100 / life of assets * 2 100 / 3 * 2 66.67% Year Amount 1 (24570 * 66.67%) * 9/12    =    12286 2 (24570 - 12286) * 66.67%   =   8190 3 (24570 - 12286 - 8190) * 66.67%   = 2729 4 (24570 - 12286 - 8190 - 2729) - 810   = 555 *The calculation of first year depreciation is for 9 months ( April to december) *Fourth year's depreciation is caluclated by subtracting the previous year's depreciation and Salvage value from cost of equipment.

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