Question

Brenan, Inc. purchased equipment at the beginning of 2004 for $2,100,000. Brenan. The equipment has an estimated residual value (salvage value) of $100,000 and an estimated life of 5 years or 100,000 hours of operation. The machinery was operated for 15,000 hours in 2004, 20,000 hours in 2005, 35,000 hours in 2006, 20,000 hours in 2007, and 10,000 hours in 2008.....Create a depreciation schedule for Straight-line depreciation method ....Cost ..Book Value (beginning) ..Depreciation Expense ..Accumulated Depreciation ..Book Value (ending), Units of production Cost ..Book Value (beginning) ..Depreciation Expense ..Accumulated Depreciation ..Book Value (ending), and Double declining balance Cost ..Book Value (beginning) ..Depreciation Expense ..Accumulated Depreciation ..Book Value (ending). Then record the depreciation journal entry using the double declining balance method for 2006.

Answer 1

Cost of Asset $ 2,100,000 Residual Value $ 100,000 Useful Life Depreciable Asset = Cost - Residual value Depreciable Asset 2000000 Depreciation p.a = Depreciable asset / Useful Life Depreciation p.a = 400000 Year 2004 2005 2006 2007 2008 Total Straight line Method Depreciation Accumulated expenses Depreciaton Book value 400,000 $ 400,000 $ 1,700,000 400,000 $ 800,000 $ 1,300,000 400,000 $ 1,200,000 $ 900,000 400,000 $ 1,600,000 $ 500,000 $ 400,000 $ 2,000,000 $ 100,000 $ 2,000,000 $ 2,000,000 $ 100,000 |

Cost of Asset $ 2,100,000 Residual Value $ 100,000 Total Operation Hours 100000 Depreciable Asset = Cost - Residual value Depreciable Asset 2000000 Depreciation per hour = Depreciable asset / Production units(hours) Depreciation per hour = 20.00 Year 2004 2005 2006 2007 2008 Total Units of Output / Activity Depreciable |Depreciation Depreciation Accumulated Hours Hours per Hour expenses Depreciaton Book value 15000 15000 $ 20.00 $ 300,000 $ 300,000 $ 1,800,000 20000 20000 $ 20.00 $ 400,000 $ 700,000 $ 1,400,000 35000 35000 $ 20.00 $ 700,000 $ 1,400,000 $ 700,000 20000 20000 $ 20.00 $ 400,000 $ 1,800,000 $ 300,000 10000 10000 $ 20.00 $ 200,000 $ 2,000,000 $ 100,000 100000 100000 $ 20.00 $ 2,000,000 $ 2,000,000 $ 100,000

Depreciation rate = ( 1*200 /useful life ) = 40% Double Decline Method Year 2004 2005 2006 2007 2008 Total Book value at Beginning of the year 2,100,000 1,260,000 756,000 453,600 272,160 Accumulate Depreciation Depreciation d rate expenses Depreciaton Book value 40.00% $ 840,000 $ 840,000 $1,260,000 40.00% $ 504,000 $1,344,000 $ 756,000 40.00% 302,400 $1,646,400 $ 453,600 40.00% 181,440 $1,827,840 $ 272,160 40.00% $ 108,864 $1,936,704 $ 163,296 | $ 1,936,704 $1,936,704 | $ 163,296