Question

Sonic Corporation purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX, at a cost of $27,000. The equipment has an estimated residual value of $1,500. The equipment is expected to process 255,000 payments over its three-year useful life. Per year, expected payment transactions are 61,200, year 1; 140,250, year 2; and 53,550, year 3. 0.49 Required: Complete a depreciation schedule for each of the alternative methods. polnts Skipped 1. Straight-line. 2. Units-of-production. 3. Double-declining-balance. еВook Complete this question by entering your answers in the tabs below. Print Required 1 Required 2 Required 3 References Complete a depreciation schedule for Straight-line method. (Do not round intermediate calculations.) Income Statement Balance Sheet Depreciation Expense Accumulated Year Cost Book Value Depreciation At acquisition 1 2 3 Required 2 Required 1

Answer 1

Straight line depreciation = (Cost-Salvage)/Useful life = (27000-1500)/3 = 8500 p.a

Straight line rate = 8500/25500 = 33.33%

Straight line method:-

	Income Statement	Balance sheet
Year	Depreciation expense	Cost	Accumulated Depreciation	Book value
At acquisition				27000
1	8500	27000	8500	18500
2	8500	27000	17000	10000
3	8500	27000	25500	1500

Units of production : -

	Income Statement	Balance sheet
Year	Depreciation expense	Cost	Accumulated Depreciation	Book value
At acquisition				27000
1	(61200/255000)*25500=6120	27000	6120	20880
2	(140250/255000)*25500=14025	27000	20145	6855
3	(53550/255000)*25500=5355	27000	25500	1500

Double declining method:-

Double declining rate = straight line rate * 2 = 33.33%*2 = 66.66%

	Income Statement	Balance sheet
Year	Depreciation expense	Cost	Accumulated Depreciation	Book value
At acquisition				27000
1	27000*66.66%=18000	27000	18000	9000
2	9000*66.66% = 6000	27000	24000	3000
3	1500 (taken as a balancing figure)	27000	25500	1500