On January 1, 2016, Initech purchased for $545,000 equipment having an estimated
ID: 2597102 • Letter: O
Question
On January 1, 2016, Initech purchased for $545,000 equipment having an estimated useful life of 10 years or 100,000 hours with an estimated salvage value of $45,000.
Required:
A) Determining the depreciation expense for 2016 and 2017 using the
1. straight-line method.
2. units-of-output method, assuming equipment was used for 7,000 hours in 2016 and 11,000 hours in 2017.
3. double-declining balance method.
B) Assume the units-of-output method is used. What is the book value of equipment at the end of 2017?
Explanation / Answer
Answer A
1 ) Depreciation expense using straight-line method.
= (Cost - Salvage value ) / Estimated useful life.
2) Depreciation expense using units-of-output method
= (Cost - Salvage value ) * ( unit of activity during the year / Total units of activity)
3) Depreciation expense using double-declining balance method
= 2 * SLM rate * Book value at the beginning of the year ; where SLM rate = 1 / estimated useful life
Answer B
Book value of equipment at the end of 2017 (using units-of-output method)
= Purchase cost - Accumulated depreciation = $545,000 - ($35,000 + $55,000) = $455,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.