Question

Sushi Corp. purchased and installed electronic payment equipment at its drive-In restaurants in San Marcos, TX, at a cost of $40,500. The equipment has an estimated residual value of $2,400. The equipment is expected to process 270,000 payments over its three- year useful life. Per year, expected payment transactions are 64,800, year 1; 148,500, year 2; and 56,700, year 3. Required: Complete a depreciation schedule for each of the alternative methods. 1. Straight-line. 2. Units-of-production. 3. Double-declining-balance. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Complete a depreciation schedule for Straight-line method. (Do not round intermediate calculations.) Income Statement Balance Sheet Year Depreciation Expense Cost Accounties Book Value Depreciation At acquisition < Required 1 Required 2 >

Answer 1

(1): Straight line depreciation: Here annual depreciation = (price – salvage value)/no. of years = (40,500-2,400)/3 = $12,700 per year

	Income statement	Balance Sheet
Year	Depreciation expense	Cost	Accumulated depreciation	Book value
At acquisition				40,500
1	12,700	40,500	12,700	27,800
2	12,700	40,500	25,400	15,100
3	12,700	40,500	38,100	2,400

(2): Units of production: Amount to be depreciated = 40500 - 2400 = 38100. Total payments = 270,000 and so depreciation per payment = 38100/270000 = 0.1411. Thus depreciation in year 1 = 64800*0.1411 = 9144. In year 2 = 148500*0.1411 = 20955 and in year 3 = 56700*0.1411 = 8001

	Income statement	Balance Sheet
Year	Depreciation expense	Cost	Accumulated depreciation	Book value
At acquisition				40,500
1	9,144	40,500	9,144	31,356
2	20,955	40,500	30,099	10,401
3	8,001	40,500	38,100	2,400

(3): Double declining balance method: Here the annual rate of depreciation will be = 100%/3 *2 = 66.67% per year. So depreciation in year 1 = 66.67% of 40500 = 27000. In year 2 = 66.67% of (40500-27000) = 9000. In year 3 depreciation amount = book value at end of year 2 - residual value = 4500-2400 = 2100

	Income statement	Balance Sheet
Year	Depreciation expense	Cost	Accumulated depreciation	Book value
At acquisition				40,500
1	27,000	40,500	27,000	13,500
2	9,000	40,500	36,000	4,500
3	2,100	40,500	38,100	2,400