Burton Excavating purchased a bulldozer onJanuary 1, 2016 The following informat
ID: 2582501 • Letter: B
Question
Burton Excavating purchased a bulldozer onJanuary 1, 2016 The following information regarding this asset and its acquisition is available: Cost Residual Value Estimated Useful Life Estimated Services Hours $380,000 $30,000 8 years 60,000 The bulldozer was operated for a total of 6,100 hours in 2016 and 8,200 hours in 2017. Compute the depreciation expense for year ended December 31, 2016 and 2017 under each of the following methods: (1) (2) (3) (4) Double-declining-balance Sum-of-the-years'-digits Straight line Service hours (Units of Production)Explanation / Answer
Answer 1 Double declining balance method Depreciation per year = 2 * Straight line depreciation rate * Beginning of the year book balance of asset Straight line depreciation per year = (Cost - Residual value)/Estimated useful life = ($380000 - $30000)/8 years = $43750 Straight line depreciation rate = Depreciation / Depreciable value = $43750 / $350000 = 12.50% Depreciation for the year ended Dec.31,2016 = 2*12.50%*$380000 = $95,000 Depreciation for the year ended Dec.31,2017 = 2*12.50%*($380000-$95000) = $71,250 Answer 2 Sum of the years digit method Sum of the year = n(n+1)/2 = 8(8+1)/2 = 36 Depreciable value of asset = Cost - residual value = $380000 - $30000 = $350000 Depreciation per year = Depreciable cost of asset *(Remaining useful life/Sum of the years digits) Depreciation for the year ended Dec.31,2016 = $350000*(8/36) = $77,777.78 Depreciation for the year ended Dec.31,2017 = $350000*(7/36) = $68,055.56 Answer 3 Straight line depreciation per year = (Cost - Residual value)/Estimated useful life = ($380000 - $30000)/8 years = $43750 Depreciation for the year ended Dec.31,2016 = $43,750 Depreciation for the year ended Dec.31,2017 = $43,750 Answer 4 Service Hours (Units of production) Depreciation per hour = (Cost - residual value)/Estimated service hours = ($380000 - $30000)/60000 hours = $5.83 per hour Depreciation for the year ended Dec.31,2016 = 6100 hours * $5.83 = $35,583.33 Depreciation for the year ended Dec.31,2017 = 8200 hours * $5.83 = $47,833.33
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