Question

Problem 9-5A Calculating depreciation-partial periods LO2, 3 West Coast Tours runs boat tours along the west coast of British Columbia. On March 5, 2020, it purchased, with cash, a cruising boat for $846,000, having a useful life of 10 years or 12,900 hours, with a residual value of $201.000. The company's year-end is December 31. Skipped Required: Calculate depreciation expense for the fiscal years 2020, 2021, and 2022 by completing a schedule. (Note: Depreciation is calculated to the nearest month. Assume actual hours of service were: 2020, 750; 2021, 1,810; 2022, 1,565.) og Depreciation Method Straight-Line Double-Declining Balance Units of Production Print Year References 2020 2021 2022

Answer 1

Depreciable cost of Boat = Cost - Salvage value

=> $846,000 - 201,000 = $645,000.

Useful life = 10 years.

Straight line depreciation :-

Depreciation per annum= (Cost of machine- Salvage valie)/Useful life => ($846,000 - 201,000)/10 =$64,500.

2020	$64,500* 8/12 = 43,000
2021	$64,500
2022	$64,500.

2) Double decking balance method:-

Depreciation rate =( 2/ Useful life) = (2÷ 10) * 100 = 20%

2020	= $846,000 * 20% * 8/12 = $112,800
2021	(846,000 - 112,800) * 20% = 146,640
2022	($846,000 - 112,800 - 146,640)= $117,312

3) Units of production

Depreciation per hour = Depreciable cost ÷ Estimated hours.

=> $645,000 ÷ 12,900 = $50 per hour.

2020	750 * $50 = $37,500
2021	1,810 * $50 = $90,500
2022	1,565 * $50 = $78,250

If you have any doubts please comment on the answer.