Depreciation Expense Practice Problem: Neon Carrot Lake Company purchased new eq

Question

Depreciation Expense Practice Problem: Neon Carrot Lake Company purchased new equipment for $19,200 on March 1, 4 Other information is as follows: o The equipment had a useful life of8 years or 41,600 total hours o The equipment has a salvage value equal to$8,800 at the end of its useful life. o Neon Carrot Lake Company uses the calendar year as its fiscal year. Instructions: PLEASE SHOW YOUR WORK. a. Compute the depreciation expense for 2017 and 2018 using the straight-line depreciation method. 2017 2018 Depreciation expense: 2017: 2018: b. Compute the depreciation expense for 2017 and 2018 using the double-declining balance depreciation method. 2017 2018 Depreciation expense: Computations: 2017: 2018 The equipment was used for 10,400 total hours in 2017 and for 12,480 total hours in 2018. Compute the depreciation expense for 2017 and 2018 using the units-of- production depreciation method c. 2017 2018 Depreciation expense: 2017: 2018:

Explanation / Answer

a) Depreciaiton =(cost-salvage value)/years
=(19200-8800)/8
=1300
for 2017 only 10 months the equipment used
=(10/12)*1300=1083.33
For 2018=1300

b)double decline balance means the rate of depreciation=2/n=2/8=25%
for 2016 it is =19200*25%=4800
20017=(19200-4800)*25%=3600

c)total hours used in 2017=10400
2018 i t is 12480
epreicaiton per hr=(19200-8800)/41600
=0.25
2017=10400*0.25=2600
2017=12480*0.25=3120

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