Depreciation by Three Methods; Partial Years
Perdue Company purchased equipment on April 1 for $32,670. The equipment was expected to have a useful life of three years, or 7,020 operating hours, and a residual value of $1,080. The equipment was used for 1,300 hours during Year 1, 2,500 hours in Year 2, 2,100 hours in Year 3, and 1,120 hours in Year 4.
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-output method, and (c) the double-declining-balance method.
Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.
a. Straight-line method
Year | Amount |
Year 1 | $ |
Year 2 | $ |
Year 3 | $ |
Year 4 | $ |
b. Units-of-output method
Year | Amount |
Year 1 | $ |
Year 2 | $ |
Year 3 | $ |
Year 4 | $ |
c. Double-declining-balance method
Year | Amount |
Year 1 | $ |
Year 2 | $ |
Year 3 | $ |
Year 4 | $ |
Requirement a
Straight line Method | ||
A | Cost | $ 32,670.00 |
B | Residual Value | $ 1,080.00 |
C=A - B | Depreciable base | $ 31,590.00 |
D | Life [in years left ] | 3 |
E=C/D | Annual SLM depreciation | $ 10,530.00 |
Depreciation schedule-Straight line method | ||||
Year | Book Value | Depreciation expense | Accumulated Depreciation | Ending Book Value |
1 | $ 32,670.00 | $ 7,898 | $ 7,897.50 | $ 24,772.50 |
2 | $ 24,772.50 | $ 10,530 | $ 18,427.50 | $ 14,242.50 |
3 | $ 14,242.50 | $ 10,530 | $ 28,957.50 | $ 3,712.50 |
4 | $ 3,712.50 | $ 2,633 | $ 31,590.00 | $ 1,080.00 |
Requirement b
Units of output method | ||
A | Cost | $ 32,670.00 |
B | Residual Value | $ 1,080.00 |
C=A - B | Depreciable base | $ 31,590.00 |
D | Usage in units(in Hours) | 7020 |
E | Depreciation per hour | $ 4.50 |
Depreciation schedule-Units of Output | |||||
Year | Book Value | Usage | Depreciation expense | Ending Book Value | Accumulated Depreciation |
1 | $ 32,670.00 | 1300 | $ 5,850 | $ 26,820.00 | $ 5,850.00 |
2 | $ 26,820.00 | 2500 | $ 11,250 | $ 15,570.00 | $ 17,100.00 |
3 | $ 15,570.00 | 2100 | $ 9,450 | $ 6,120.00 | $ 26,550.00 |
4 | $ 6,120.00 | 1120 | $ 5,040 | $ 1,080.00 | $ 31,590.00 |
Requirement c
Double declining Method | ||
A | Cost | $ 32,670.00 |
B | Residual Value | $ 1,080.00 |
C=A - B | Depreciable base | $ 31,590.00 |
D | Life [in years] | 3 |
E=C/D | Annual SLM depreciation | $ 10,530.00 |
F=E/C | SLM Rate | 33.33% |
G=F x 2 | DDB Rate | 66.6667% |
Depreciation schedule-Double declining | |||||
Year | Beginning Book Value | Depreciation rate | Depreciation expense | Accumulated Depreciation | Ending Book Value |
1 | $ 32,670.00 | 66.6667% | $ 16,335 | $ 16,335.01 | $ 16,334.99 |
2 | $ 16,334.99 | 66.6667% | $ 10,890 | $ 27,225.01 | $ 5,444.99 |
3 | $ 5,444.99 | 66.6667% | $ 3,630 | $ 30,855.00 | $ 1,815.00 |
4 | $ 1,815.00 | 66.6667% | $ 735 | $ 31,590.00 | $ 1,080.00 |
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