Question

Seconds Fried Chicken bought equipment on January 2, 2018, for $27,000. The equipment was expected to remain in service for four years and to operate for 5,250 hours. At the end of the equipment's useful life, Seconds estimates that its residual value will be $6,000. The equipment operated for 525 hours the first year, 1,575 hours the second year, 2,100 hours the third year, and 1,050 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. 0 Requirements Straight-Line Depreciation Schedule Depreciation for the Year Asset Depreciable Useful Depreciation Accumulated Date Cost Cost Life Expense Depreciation 1-2-2018 12-31-2018 Book Value 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. 2. Which method tracks the wear and tear on the equipment most closely? 12-31-2019 12-31-2020 12-31-2021 Print Done Before calculating the units-of-production depreciation schedule, calculate the depreciation expense per unit. Select the formula, then enter the amounts and calculate the depreciation expense per unit. = Depreciation per unit

Answer 1

Straight line Depreciation = (Original value - Salvage value) / Useful Life
= ($27000-6000)/4 = $5250 per year

Date	Asset Cost	Depreciable Cost	Useful Life	Depreciation Expense	Acc Dep	Book Value
01-02-2018	$        27,000					$        27,000
12-31-2018		$        21,000	4	$           5,250	$           5,250	$        21,750
12-31-2019		$        15,750	3	$           5,250	$        10,500	$        16,500
12-31-2020		$        10,500	2	$           5,250	$        15,750	$        11,250
12-31-2021		$           5,250	1	$           5,250	$        21,000	$           6,000

Units of Production Depreciation = (Original value - Salvage value) / Total hours
= ($27000-6000)/5250 = $4 per hour

Date	Asset Cost	Depreciation per unit	Number of Units	Depreciation Expense	Acc Dep	Book Value
01-02-2018	$        27,000					$        27,000
12-31-2018		$                  4	525	$           2,100	$           2,100	$        24,900
12-31-2019		$                  4	1575	$           6,300	$           8,400	$        18,600
12-31-2020		$                  4	2100	$           8,400	$        16,800	$        10,200
12-31-2021		$                  4	1050	$           4,200	$        21,000	$           6,000

DDB Method

Date	Asset Cost	Book Value	DDB Rate	Depreciation Expense	Acc Dep	Book Value
01-02-2018	$        27,000					$        27,000
12-31-2018		$        27,000	50%	$        13,500	$        13,500	$        13,500
12-31-2019		$        13,500	50%	$           6,750	$        20,250	$           6,750
12-31-2020		$           6,750		$              750	$        21,000	$           6,000
12-31-2021		$           6,000		$                 -	$        21,000	$           6,000

2.
Units of Production method