Question

On January 2, 2018, Tucker Enterprises, Inc., paid $204,500 for equipment used in manufacturing automotive supplies. In addition to the basic purchase price, the company paid $900 for transportation charges, $800 for insurance for the equipment while in transit, $11,600 sales tax, and $2,200 for a special platform on which to place the equipment in the plant. Management of Tucker Enterprises, Inc., estimates that the equipment will remain in service for five years and have a residual value of $20,000. The equipment will produce 60,000 units the first year, with annual production decreasing by 10,000 units during each of the next four years (i.e., 50,000 units in year 2; 40,000 units in year 3; and so on, for a total of 200,000 units). In trying to decide which depreciation method to use, Tucker Enterprises, Inc., requested a depreciation schedule for each of the three depreciation methods (straight-line, units of production, and double-declining balance).

Answer 1

Requirement1- Straight line method of Depreciation Straight line Depreciation rate One year/Useful life 1/5 SL Depreciation rate 20% Asset cost 204500+900+800+ 11600+2200 220000 (Assuming sales tax is not eligible to take input tax credit, students may assume it is eligible for ITC and reduce 11600 from Asset cost, the calculation will be changed accordingly) Straight line Depreciation Schedule Вook Asset Depexp| Acс Dep Dep rate Dep cost value Date cost ఎడడుడు Jan2, 2018 220000 220000 Dec31, 2018 220000 20 200000 40000 40000 180000 140000 Dec 31, 2019 220000 20 200000 40000 80000 120000 Dec31, 2020 220000 20 200000 40000 100000 Dec31, 20 20000 20 200000 4000 160000 000 Dec 31, 2022 220000 20000 20 200000 40000 200000

Double Declining Balancing Method Double declining balance rate SL.Dep rate X DDB rate multiplier DDB rate wwwwww గ్గగగ 40% 20 X Double Declining Balance (DDB) Deprecitaion schedule Book Asset DDB Book value Depexp AccDep cost rate value Date Jan2, 2018 40% 220000 220000 40% 220000 88000 Dec31, 2018 220000 88000 132000 Dec31, 2019 40% 79200 220000 132000 52800 140800 40% 79200 31680 172480 Dec31, 2020 220000 47520 40% Dec31, 2021 220000 47520 19008 191488 28512 40% 28512 202892.8 Dec 31, 2022 220000 11404.8 17107.2

Units of Production Method Depreciation expenses per unit /Totalunit output Depreciable cost Depreciation perunit 200000 200000 1 Units of Production Depreciation Schedule Book Asset Dep rate No.of units Depexp Acc Dep value Date cost Jan2, 2018 220000 220000 Dec 31, 2018 60000 220000 1 60000 60000 160000 110000 Dec 31, 2019 220000 1 50000 50000 110000 Dec 31, 2020 220000 1 40000 40000 150000 70000 180000 40000 Dec31, 2021 220000 1 30000 30000 220000 20000 Dec 31, 2022 20000 200000 20000
Depreciable cost = Asset cost - Residual value

= 220000-20000

= 200000