Question

On October 1, 2021, the Allegheny Corporation purchased equipment for $289,000. The estimated service life of the equipment is 10 years and the estimated residual value is $3,000. The equipment is expected to produce 520,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. exercise 11-3 (Algo) Part 1 Straight line. Straight-Line Depreciation 1 Choose Denominator: Choose Numerator: Annual Depreciation = Annual Depreciation Annual Depreciation x Fraction of Year Depreciation expense Year 2021 2022

Answer 1

1) Straight line: Choose Numerator: /Choose Denominator: - Annual Depreciation = Annual Depreciation Cost minus salvage / Estimated Useful life (years) 28,600 286,000 10 Annual Depreciation x Fraction of Year 28,600 x3/12 28,600x12/12 Depreciation expense $ Year 2021 $ 7,150 2022 $ 28,600 Working Notes: Cost of Equipment 289,000 Less: Salvage value (3,000) Cost minus salvage 286,000 |3 Months Number of periods used in year 2021 Oct' 21 Dec 21 2) Double-Declining balance Accumulated depreciation Depreciation expense Beginning of Period Annual period Fraction of Year Book value Depreciation rate Book value 3/12 12/12 289,000 20% 274,550 2021 14,450 14,450 20% 274,550 54,910 2022 69,360 219,640 Working Notes || ( 100 % / life of assets) x 2 (100 %/10) x 2 Depreciaion rate 20%

3) Select formula for units of Production Depreciation (Cost- Salvage)/Total units of production Calculate 2021 Depreciation expense Depreciation per unit rate 0.55 Units produced in 2021 26,000 Depreciation in 2021 Calculate 2022 Depreciation expense $ 14,300 $ Depreciation per unit rate Units produced in 2022 Depreciation in 2022 0.55 41,000 $ 22,550 Working Notes Cost- Salvage Value 286,000 Total Units of production 520,000 Depreciation per unit rate ($ 286,000/520,000) 0.55