Question

On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $30,000. Residual value at the end of an estimated four-year service life is expected to be $2,000. The company expects the equipment to operate for 10,000 hours. The equipment operated for 2,200 and 3,000 hours in 2021 and 2022, respectively. Required: a. Calculate depreciation expense for 2021 and 2022 using straight line method. b. Calculate depreciation expense for 2021 and 2022 using double-declining balance method. C. Calculate depreciation expense for 2021 and 2022 using units-of-production using hours operated. Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate depreciation expense for 2021 and 2022 using straight line method. Straight-Line Depreciation Choose Numerator: Choose Denominator: Annual Depreciation Expense Depreciation Expense Depreciation Expense 2021 2022

Answer 1

Solution: Straight-Line Depreciation Choose Numerator: \/ |Choose Denominator:/= Annual DepreciationExpense Estimated Useful Life Cost minus Salvage Depreciation Expense (years) $28,000 / $7,000 Depreciation Expense 2021 $7,000 2022 $7,000 Explanation : Straight-line depreciation : ($30,000 - $2,000)/4years = $28,000 / 4 = $7,000 per year b. Double-declining balance method Depreciation for the Period End of Period Annual Beginning ofPeriod Depreciation Accumulated Period BookValue Depreciation Rate (%) Expense Depreciation Book Value 2021 $30,000 50% $15,000 $15,000 $15,000 2022 $15,000 50% $7,500 $22,500 $7,500 Double-declining balance method: Straight-line rate is 25% (1:4 years) x 2 = 50% DDB rate For 2021 : $30,000 x 50% = $15,000 For 2022: ($30,000 - $15,000) 50% = $7,500. c. Units-of-production method: Calculation of 2021 depreciation expense: Depreciation per machine hour Machine hours in 2021 Depreciation in 2021 $2.80 2,200 $6,160.00 Calculation of 2022 depreciation expense: Depreciation per machine hour Machine hours in 2022 Depreciation in 2022 $2.80 3,000 $8,400.00 Units-of-production: (Cost - Salvage) / Total number of operated hours Units-of-production: ($30,000 - $2,000) / 10,000 = $2.8 per hour For 2021: 2,200 hours x $2.8 = $6,160 For 2022: 3,000 hours x $2.8 = $8,400