Question

Test 2 Calculator Depreciation by Three Methods; Partial Years ? perdue Company purchased equipment on April 1 for $86,670. The equipment was expected to have a useful life of three years, or 7,020 operating hours, and a residual value of $2,430. 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: Petermine 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) the units-of-activity method, and Kc) the double-declining-balance method. Note: FOR DECLINING BALANCE ONLY, round the final 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 5 b. Units-of-activity method Year Amount Year 1 Year 2 Year 3 s Year 4 5 Previous Next All work saved. Save and Exit Submit Test for Grading

Answer 1

Answer: Amount in $ a.Straight Line Method Depreciation per year = Depreciable Value / Life of an Asset Value of Equipment Life in years Salvage Value Depreciable Value ( Value of Equipment- Salvage Value) Depreciation per Year 86670 3 2430 84240 28080 Depreciation Expenses : 1st year 2nd Year 3rd Year 4th year 21060 Since Equipment is Purchased on April 1st hence 9 months of Depreciation 28080 28080 7020 Since Equipment is Purchased on April 1st hence 3 months of Depreciation 7020 86670 2430 12 b. Units of Activity method Total operating Hours Value of Equipment Salvage Value Depreciation / Hour Depreciation Expenses : Year 1st year 2nd Year 3rd Year 4th year Hours 1300 2500 2100 1120 Depreciation Expenses 15600 30000 25200 13440 C) Double Declining Method Depreciation = Book Value of Asset * Depreciation Rate Depreciation rate = Accelerator * Straight line rate Straight Line Rate = 1/3 = 0.3333 or 33.33% Double Declining Rate = 2*33.33% = 66.66% Depreciation Expenses : Year Caculation Depreciation Expenses. 1St year 86670*66.66% 57774.2220 2nd Year (86670-57774) *66.66% 19262.0000 3rd Year (86670-57774-19262) *66.66% 6422.0244 4th year (86670-57774.2220-19262-6422.0244)*| 2140.95495