Question

Depreciation by Three Methods; Partial Years Layton Company purchased tool sharpening equipment on October 1 for $49,950. The equipment was expected to have a useful life of three years or 4,860 operating hours, and a residual value of $1,350. The equipment was used for 900 Year 1, 1,700 hours in Year 2, 1,500 hours in Year 3, and 760 hours in Year 4. Required: Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method. Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar. a. Straight-line method Year Amount Year 1 $ 49,950 x Year 2 Year 3 Year 4 b. Units-of-activity method Year Amount Year 1 Year 2 Year 3 Year 4 C. Double-declining-balance method Year Amount Year 1 Year 2 Year 3 Year 4

Answer 1

(a) Straight line method Year Amount Year I $ 4,050 Year 2 $ 16,200 year 3 $ 16, 200 Year 4 $ 12, 150 Calculation": Straight une method: Depreciation = cost of equipment - Residual value Useful dufe of equipment Year 1. Depreuat 1950 - $1,350) 3 years] x 3 month 1 - 12 = ($ 48,600 - 3 years) x 3 months 12 - $ 16,200 x 3 months = $4,050 12

Year 2 Depreciation = {1$ 49,950 - $1,350) + 3 years) = $ 48,600 = 3 years = $16,200 year 3 Depreciation = {(849,950 - $1,350) : 3 years] - $48,600 : 3 - $ 16, 200 Year 4: Depreciation={($49,950 - $1,350) + 3 years] a monthy - $16,200 x 9 months = $12,150 12

Year Year abs Units-of-activity method Amount $ 9,000 Year 2 $ 17,000 Year 3 $ 15,000 Year y $ 7,600 Calculation. Units- of - activity method: Depreciation Rate per unit = Cost - Salvage value. Total units produced during the asset's lifetime Depreciation for the year = (Number of units produced during the year x Depreciation Rate per unit) Depreciation Rate Per Unit = $49,950 - $1,350 4,860 hours = $48,600 4,860 hours = $10 per hour Depreciation for Year 1 = 900 hours x $ 10 (calculated above) = $9000 Depreciation for year 2 = 1,700 hours x $ 10 = $17,000 Depreciation for year 3 = 1,500 hours X $ 10 = $15,000 Depreciation for year 4 = 760 hours x $10 = $7,600

Year (C) Double declining - balance method Amount Year $8,325 Year 2 $ 27,750 Year 3 $ 9,250 Year 4 1 & 3, 24 Calculation : Double - Deceuning-Balance Method Depreciation - 2x cost of the asset & useful life for years: Depreciation = (2x & 49,950 : 3 years) x 3 monthe = $33,300 x 3, months = $8,325 12 Year 2: Depreciation = ($ 49,950 - $8,325) x 2 = $ 41,625 X 2 3 years = $27,750 Year 3: Depreciation ($49,950 - $8,325-$27,750) x 2 = $13,875 X 3 year 4: Depreciation = $9,250 ($49,950 - $8,325-$27,750 - $95 - $1,350) - $3,275 Led below $1,350, C Book value should not be reduce the residual value]