Question

Depreciation by Three Methods; Partial Years Layton Company purchased tool sharpening equipment on October 1 for $108,540. The equipment was expected to have a useful life of three years or 8,100 operating hours, and a residual value of $3,240. The equipment was used for 1,500 hours during Year 1, 2,800 hours in Year 2, 2,400 hours in Year 3, and 1,400 hours in Year 4. Required: Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method. Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.

Answer 1

c. Double Declining Balance Method Year Depreciation per year Year 1 18.091 Year 2 s 60.302 Year 3 S 20.099 Year 4 s 6.808 Year - 1 Declining Balance Rate =1/3*200 = 66.6667% Depreciation =$108,540*66.6667%*3/12 = $18.091 Year - 2 Book Value = Cost - Accumulated Depreciation = $108,540-$18,091 Depreciation = $90,449*66.6667% =$60,302 Year - 3 Book Value =$90.449-$60,302 = $30,147 Depreciation = $30.147*66.6667% = $20,099 Year-4 Book Value = $30,147-$20,099 = $10,048 Depreciation = $10,048*66.6667%*9/12 = $5,024 Allowable Depreciation = $6,808 Note : Under Double Declining Balance method depreciation only be allowed up to the point where book value = Residuval Value. In This Problem more Depreciation Provided instead of actuval Depreciation to maintain Residuval value at the end of 4th year.