Question

Peyton's Machine Shop purchased new equipment for a total amount of $250,000. The equipment is expected to last 6 years and have a residual/scrap/salvage value of $8,000 at the end of that life. Usage of the equipment is tracked in machine hours and the equipment in total is expected to last 35,000 hours. During year one 12,000 hours were used, during year two 5,000 hours were used, during year three 7,500 hours were used, during year four no hours were used due to renovations of the shop, during year five 8,500 hours were used, and during year six 1,250 hours were used.

Peyton's Machine Shop purchased new equipment for a total amount of $250,000. The equipment is expected to last 6 years and have a residual/scrap/salvage value of $8,000 at the end of that life. Usage of the equipment is tracked in machine hours and the equipment in total is expected to last 35,000 hours. During year one 12,000 hours were used, during year two 5,000 hours were used, during year three 7,500 hours were used, during year 3 four no hours were used due to renovations of the shop, during year five 8,500 hours were used, and during year six 1,250 hours were used. Requirements: Complete the depreciation schedule for Peyton's Machine Shop using each of the three depreciation methods (straight line, double declining balance, and units of production.) 5 7 A.) Straight Line Depreciation Depreciation Expense/Accumulated Beginning Book Value Depreciation Rate Ending Accumulated Depreciation Ending Book Value Year 1 16 B.) Double Declining Balance Depreciation Depreciation Expense/Accumulated Depreciation Ending Accumulated Depreciation Year Beginning Book Value Depreciation Rate Ending Book Value 5 25 C.) Units of Production Depreciation Depreciation Expense/Accumulated Depreciation Ending Accumulated Depreciation Year Beginning Book Value Depreciation Rate #of hours used this year Ending Book Value 1 2 3

Answer 1

	A	B	C	D	E	F	G
1	A.) Straight Line Depreciation
2	Year	Beginning Book Value	Depreciation Rate	Depreciation Expense/Accumulated Depreciation	Ending Accumulated Depreciation	Ending Book Value
3	1	250000	16.67%	40333	40333	209667
4	2	209667	16.67%	40333	80667	169333
5	3	169333	16.67%	40333	121000	129000
6	4	129000	16.67%	40333	161333	88667
7	5	88667	16.67%	40333	201667	48333
8	6	48333	16.67%	40333	242000	8000
9
10	B.) Double Declining Balance Depreciation
11	Year	Beginning Book Value	Depreciation Rate	Depreciation Expense/Accumulated Depreciation	Ending Accumulated Depreciation	Ending Book Value
12	1	250000	33.33%	83333	83333	166667
13	2	166667	33.33%	55556	138889	111111
14	3	111111	33.33%	37037	175926	74074
15	4	74074	33.33%	24691	200617	49383
16	5	49383	33.33%	16461	217078	32922
17	6	32922	33.33%	10974	228052	21948
18
19	C.) Units of Production Depreciation
20	Year	Beginning Book Value	Depreciation Rate	# of hours used this year	Depreciation Expense/Accumulated Depreciation	Ending Accumulated Depreciation	Ending Book Value
21	1	250000	6.91	12000	82971	82971	167029
22	2	167029	6.91	5000	34571	117543	132457
23	3	132457	6.91	7500	51857	169400	80600
24	4	80600	6.91	0	0	169400	80600
25	5	80600	6.91	8500	58771	228171	21829
26	6	21829	6.91	1250	8643	236814	13186

Above figures have been calculated in the following manner:

	A	B	C	D	E	F	G
1	A.) Straight Line Depreciation
2	Year	Beginning Book Value	Depreciation Rate	Depreciation Expense/Accumulated Depreciation	Ending Accumulated Depreciation	Ending Book Value
3	1	250000	=1/6	=(250000-8000)*C3	=D3	=B3-D3
4	2	=F3	=1/6	=(250000-8000)*C4	=E3+D4	=B4-D4
5	3	=F4	=1/6	=(250000-8000)*C5	=E4+D5	=B5-D5
6	4	=F5	=1/6	=(250000-8000)*C6	=E5+D6	=B6-D6
7	5	=F6	=1/6	=(250000-8000)*C7	=E6+D7	=B7-D7
8	6	=F7	=1/6	=(250000-8000)*C8	=E7+D8	=B8-D8
9
10	A.) Double Declining Balance Depreciation
11	Year	Beginning Book Value	Depreciation Rate	Depreciation Expense/Accumulated Depreciation	Ending Accumulated Depreciation	Ending Book Value
12	1	250000	=2/6	=B12*C12	=D12	=B12-D12
13	2	=F12	=2/6	=B13*C13	=E12+D13	=B13-D13
14	3	=F13	=2/6	=B14*C14	=E13+D14	=B14-D14
15	4	=F14	=2/6	=B15*C15	=E14+D15	=B15-D15
16	5	=F15	=2/6	=B16*C16	=E15+D16	=B16-D16
17	6	=F16	=2/6	=B17*C17	=E16+D17	=B17-D17
18
19	A.) Units of Production Depreciation
20	Year	Beginning Book Value	Depreciation Rate	# of hours used this year	Depreciation Expense/Accumulated Depreciation	Ending Accumulated Depreciation	Ending Book Value
21	1	250000	=(250000-8000)/35000	12000	=C21*D21	=E21	=B21-E21
22	2	=G21	=(250000-8000)/35000	5000	=C22*D22	=F21+E22	=B22-E22
23	3	=G22	=(250000-8000)/35000	7500	=C23*D23	=F22+E23	=B23-E23
24	4	=G23	=(250000-8000)/35000	0	=C24*D24	=F23+E24	=B24-E24
25	5	=G24	=(250000-8000)/35000	8500	=C25*D25	=F24+E25	=B25-E25
26	6	=G25	=(250000-8000)/35000	1250	=C26*D26	=F25+E26	=B26-E26