Question

Depreciation by Three Methods: Partial Years Layton Company purchased tool sharpening equipment on October 1 for $108,000. The equipment was expected to have a useful life of three years, or 12.000 operating hours, and a residual value of $7,200. The equipment was used for 1,350 hours during Year 1, 4,200 hours in Year 2, 3,650 hours in Year 3, and 2.500 hours in Year 4 MIT 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) units-of- activity method, and (c) the double-declining balance method. Note: FOR DECUNING BALANCE ONLY, round the answer for each year to the nearest whole dollar, a. Straight-line method

Answer 1

Solution:

Year	Straight-Line	Units-of-Activity	Double-Declining-Balance
1	$             8,400	$          11,340	$          17,998
2	$          33,600	$          35,280	$          59,995
3	$          33,600	$          30,660	$          20,002
4	$          25,200	$          23,520	$            2,804
Totals	$        100,800	$       100,800	$        100,800

Notes:

1) Straight-Line = (108000-7200) / 3 years = $ 33,600

2) For first year, depreciation is calculated for 3 Months only.

3)Units-of-Activity Method:

Year	Units-of-Activity	Calculation
1	$             11,340	(108000-7200)/12000hrs*1350hrs
2	$             35,280	(108000-12000)/12000hrs*4200hrs
3	$             30,660	(108000-12000)/12000hrs*3650hrs
4	$             23,520	(108000-12000)/12000hrs*2800hrs
Totals	$           100,800

4)Double-Declining-Balance

Year	Opening Balance	Depreciation	Accumulated Depreciation	Closing Balance
1	$        108,000	$          17,998	$          17,998	$          90,002
2	$          90,002	$          59,995	$          77,993	$          30,007
3	$          30,007	$          20,002	$          97,996	$          10,004
4	$          10,004	$            2,804	$        100,800	$            7,200

Double-Declining-Balance Depreciation rate = 66.66% (( 1 / 3 years ) * 2)

For first year, depreciation is calculated for 3 Months only.