Question

Mama's Fried Chicken bought equipment on January 2, 2018, for $18,000. The equipment was expected to remain in service for four years and to operate for 5,000 hours. At the end of the equipment's useful life, Mama's estimates that its residual value will be $3,000. The equipment operated for 500 hours the first year, 1,500 hours the second year, 2,000 hours the third year, and 1,000 hours the fourth year. Read the requirements. Requirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. Begin by preparing a depreciation schedule using the straight-line method. Straight-Line Depreciation Schedule Depreciation for the Year Asset Depreciable Useful Depreciation Accumulated Book Date Cost Cost Life Expense Depreciation Value 1-2-2018 18000 18000 12-31-2018 1 4 years 12-31-2019 1 4 years 12-31-2020 1 4 years 12-31-2021 / 4 years IIIIII11

Answer 1

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Statement showing Computations		Depreciation for the year
Date	Asset Cost	Depreciable cost	Useful Life	Depreciation Expense	Accumulated depreciation	Book Value
1-2-2018	18,000.00					18,000.00
12-31-2018		15,000.00	4.00	3,750.00	3,750.00	14,250.00
12-31-2019		15,000.00	4.00	3,750.00	7,500.00	10,500.00
12-31-2020		15,000.00	4.00	3,750.00	11,250.00	6,750.00
12-31-2021		15,000.00	4.00	3,750.00	15,000.00	3,000.00
Units of production
Statement showing Computations		Depreciation for the year
Date	Asset Cost	No of hours	Depreciation rate	Depreciation Expense	Accumulated depreciation	Book Value
1-2-2018	18,000.00					18,000.00
12-31-2018		500.00	3.00	1,500.00	1,500.00	16,500.00
12-31-2019		1,500.00	3.00	4,500.00	6,000.00	12,000.00
12-31-2020		2,000.00	3.00	6,000.00	12,000.00	6,000.00
12-31-2021		1,000.00	3.00	3,000.00	15,000.00	3,000.00
Cost	18,000.00
Residual Value	3,000.00
No of hours	5,000.00
Depreciation rate = (18000 - 3000)/5000	3.00
Double declining balance
Statement showing Computations		Depreciation for the year
Date	Asset Cost	Depreciable cost	Dep Rate	Depreciation Expense	Accumulated depreciation	Book Value
1-2-2018	18,000.00					18,000.00
12-31-2018		18,000.00	50.00%	9,000.00	9,000.00	9,000.00
12-31-2019		9,000.00	50.00%	4,500.00	13,500.00	4,500.00
12-31-2020		4,500.00	50.00%	1,500.00	15,000.00	3,000.00
12-31-2021		3,000.00	50.00%	-	15,000.00	3,000.00
Life in years	4.00
Depreciation rate =1/4*2	50%