Part 2: Caleulation of Depreciation Expense (30 Points) Orchid Lake Company purc

Question

Part 2: Caleulation of Depreciation Expense (30 Points) Orchid Lake Company purchased new equipment for $8,100 on February 1, 2017. Other information is as follows: The equipment had a useful life of 3 years or 11,700 total hours The equipment has a salvage valuc equal to $4,200 at the end of its useful life. Orchid 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: Computations: 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: c. The equipment was used for 2,925 total hours in 2017 and for 3,510 total bours in 2018. Compute the depreciation expense for 2017 and 2018 using the units-of- production depreciation method. 2017 2018 Depreciation expense: Computations: 2017: 2018:

Explanation / Answer

1. Straight line method

Computation

2017: = (8100 - 4200) / 3 years * 11/12 = $1192

2018: = (8100 - 4200) / 3 years = $1300

2. Double declining balance

Computation:

Straight line depritiation rate = 100 / 3 years = 33.3333%

Double declining depritiation rate = 33.3333 * 2 = 66.6666%

2017; = 8100 * 66.6666% * 11/12 = 5400 * 11 / 12 = $4950

2018 = (8100 - 4950) * 66.6666% = $2100

3. Units of Production depritiation method

Computation:

2017: = (8100 - 4200) * 2925 / 11700 = $975

2018: = (8100 - 4200) * 3510 / 11700 = $1170

2017 2018 Depritiation expenses 1192 1300

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