Question

1. Calculate the amount of depreciation expense to report for the years ended December 31, 2016 and December 31, 2017 for equipment purchased on July 1, 2016 for $26,000. The equipment has a salvage value of $2,000 and an estimated useful life of 4 years or 24,000 hours. Assume the equipment was used for 2,000 hours from July 1, 2016 to December 31, 2016. Assume the company uses: a) Straight Line method: ao1:ycara tul year -a oOD-$200014 b) Double declining Balance method: c) Units of Production method: 2. Prepare the Journal Entry to record the depreciation for a) above: Cred Account Titles & Explanation Debit Date

Answer 1

	SOLUTION : 1 (A)
		CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR MACHINE
		Purchase Cost of Machine	$                      26,000
		Less: Salvage Value	$                        2,000
		Net Value for Depreciation	$                      24,000
		Usefule life of the Assets	4 years
		Depreciation per year = Value for Depreciation / 4 years =	$                        6,000
		Total Depreciation for the per year 2016 ($ 6,000 X 6 / 12)	$                        3,000
		(Equipment is used from July 1 to December 31 = 6 months)
		Total Depreciation for the per year 2017	$                        6,000
	SOLUTION : 1 (B)
		CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD FOR MACHINE
		Purchase Cost of Machine	$                      26,000
		Rate of Depreciation =
		Rate of Depreciation = (1 / 4 Years )	0.25   OR 25%
		(Depreication / Purchase price )
		Double decline deprection rate = 25% * 2 =	50.00%
		Depreciation for the year 1 =
		Purchase Value =	$                      26,000
		Depreciation for the year 1 @ 50%	$                      13,000
		Closing value of Equipment at year end 1	$                      13,000
		Opening balance of year 2	$                      13,000
		Depreciation for the year 2 @ 50%	$                        6,500
		Closing value of Equipment at year end 2	$                        6,500
		Depreciation of year 1 =	$                      13,000
		Depreciation of year 2 =	$                        6,500
	SOLUTION : 1 (C)
		CALCULATION OF THE DEPRECIATION AS PER UNITS OF PRODUCTION
		Purchase Cost of Machine	$                26,000.00
		Less: Salvage Value	$                  2,000.00
		Net Value for Depreciation	$                24,000.00
		Expected to production in hours =	24,000.00	Hours
		Depreciation per Hours =	$                          1.00	Per Hours
		($ 24,000 / 24,000 Hours)
		Depreciation for Year 1 = (2000 units * $ 1.00)	$                  2,000.00
	SOLUTION : 2
	Date	General Journal	Debit	Credit
	Dec 31, 2016	Depreciation Expenses	3,000
		To Accumulated Depreciation		3,000.00
		(Record the depreciation expenses of year 1)
	Dec 31, 2017	Depreciation Expenses	6,000
		To Accumulated Depreciation		6,000.00
		(Record the depreciation expenses of year 2)