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 $61,290. The equipment was expected to have a useful life of three years, or 5,940 operating hours, and a residual value of $1,890. The equipment was used for 1,100 hours during Year 1, 2,100 hours in Year 2, 1,800 hours in Year 3, and 940 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-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 Amount 14,850 19,800 19,800 4,950 Year 4 b. Units-of-output method Year Year 1 Year 2 Year 3 Amount 11,000 21,000 18,000 9,400 Year 4 c. Double-declining-balance method Year Year 1 Year 2 Year 3 Amount 30,645X 20,430 6,810 X Year 4 567.5 X Feedback

Explanation / Answer

Ans.c Double declining balance method: Year Amount (rounded) 1 30647 2 20430 3 6809 4 1514 Total 59400 *Calculation: Year Amount 1 (61290 * 66.67%) * 9 /12 30646.53 2 (61290 - 30646.53) * 66.67% 20430 3 (61290 - 30646.53 - 20430) * 66.67% 6809.32 4 (61290 - 30646.53 - 20430 - 6809.32 - 1890) 1514.15 *Double declining balance rate = 2 / life * 100 2 / 3 *100 66.67% *Depreciation of fourth year is caluclated by subtracting the previous year's depreciation and residual value from cost of Equipment.

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