Question

Depreciation by Three Methods; Partial Years Perdue Company purchased equipment on April 1 for $48,870. The equipment was expected to have a useful life of three years, or 4,320 operating hours, and a residual value of $1,350. The equipment was used for 800 hours during Year 1, 1.500 hours in Year 2, 1,300 hours in Year 3, and 720 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-decining 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 S Year 4 b. Units-of-output method Year Amount Year 1 Year 2 Year 3 Year 4 c. Double-declining balance method Amount Year

Answer 1

a. Straight-line method:

Year 1	11,880	{(48,870 - 1,350) / 3} * (9/12)
Year 2	15,840	{(48,870 - 1,350) / 3}
Year 3	15,840	{(48,870 - 1,350) / 3}
Year 4	3,960	{(48,870 - 1,350) / 3} * (3/12)
	47,520

b. Units-of-output method:

Depreciation per operating hour = (48,870 - 1,350) / 4,320 = 11

Year 1	8,800	(800 * 11)
Year 2	16,500	(1,500 * 11)
Year 3	14,300	(1,300 * 11)
Year 4	7,920	(720 * 11)
	47,520

c. Double-declining-balance method:

Rate of depreciation

= (100/useful life) * 2

= (100/3)*2 = 66.67%

Year 1	24,435	(48,870*66.67%) * (9/12)
Year 2	16,290	(48,870 - 24,435) * 66.67%
Year 3	5,430	(48,870 - 24,435 - 16,290) * 66.67%
Year 4	1,365	(48,870 - 24,435 - 16,290 - 5,430) - 1,350
	47,520