On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $40,000. Residual value at the end of an estimated four-year service life is expected to be $4,000. The company expects the equipment to operate for 20,000 hours. The equipment operated for 2,700 and 3,500 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.
A.straight line method
depreciation = [cost-salvage]/number of years
=[$40,000-4,000]/4
=$9,000
2021=$9,000
2022=$9,000
B.double declining
= 100%/useful life *2
=100/4 *2
=50%
Year | Cost | Rate | Depreciation | Ending balance |
2021 | $40,000 | 50% | $20,000[$40,000*50%] | $20,000[40,000-20,000] |
2022 | $20,000 | 50% | $10,000[$20,000*50%] | $10,000 [20,000-10,000] |
C] units of production
[cost-salvage]/planned units
=[$40,000-4,000]/20,000 hours
=$1.8 per hour
Year | Depreciation rate | Units produced | depreciation | |
2021 | $1.8 | 2,700 | $4,860[$1.8*2,700] | |
2022 | $1.8 | 3,500 | $6,300[$1.8*3,500] | |
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A.straight line method
depreciation = [cost-salvage]/number of years
=[$40,000-4,000]/4
=$9,000
2021=$9,000
2022=$9,000
B.double declining
= 100%/useful life *2
=100/4 *2
=50%
Year | Cost | Rate | Depreciation | Ending balance |
2021 | $40,000 | 50% | $20,000[$40,000*50%] | $20,000[40,000-20,000] |
2022 | $20,000 | 50% | $10,000[$20,000*50%] | $10,000 [20,000-10,000] |
C] units of production
[cost-salvage]/planned units
=[$40,000-4,000]/20,000 hours
=$1.8 per hour
Year | Depreciation rate | Units produced | depreciation | |
2021 | $1.8 | 2,700 | $4,860[$1.8*2,700] | |
2022 | $1.8 | 3,500 | $6,300[$1.8*3,500] | |
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