Question

5 Computing Partial Period Depreciation under Multiple Depreciation Methods To demonstrate the computations involved in several methods of depreciating a fixed asset, the following information is provided. Cost and residual value Estimated service life Acquisition cost $45,000 Years Residual value $1,800 Service hours 36,000 Productive output (units) 86,400 Required Compute the annual depreciation using each of the following methods assuming that the asset was purchased on August 1, 2020. a. Straight-line depreciation: Compute the annual depreciation rate and amount for each year. Depreciation rate: 2020 2021 2022 2024 $ $ $ $ $ 2023 2025 b. Units-of-production method using service hours as a measure of input: Compute the depreciation rate and amount for the first partial year assuming 3,240 service hours of actual operation. Depreciation rate: 2020 c. Units-of-production method using units produced as a measure of output: Compute the depreciation rate and amount for the first partial year assuming 6,480 units of output. Depreciation rate: 2020 d. Sum-of-the-years'-digits method: Compute the depreciation amount for each year. 2020 2021 2022 2023 2024 2025 $ $ e. Double-declining-balance method: Compute the depreciation amount for each year. 2020 2021 2022 2023 2024 2025 $ $ $

Answer 1

explanation straight line method explanation equipment residual value life 45,000 1,800 5 years straight line depreciation =( asset cost- residual value ) /life 8640 a)answer Depreciation rate=8640/(45000-1800)*100 year depreciatio 20% 2020 2021 2022 2023 2024 2025 3600 8640 8640 8640 8640 5040

45,000 1,800 36000 .units of activity method equipment scrap value projected hours depreciationcost per hour =(asset cost- scrap)/total production hour b) depreciatio rate=3888/(45000-1800)*100 1.20 9% 2020 depreciation 2020 =3240*1.20 3888 45,000 1,800 86400 .units of activity method equipment scrap value projected units depreciationcost per unit =(asset cost- scrap)/total production unit c) depreciatio rate=3888/(45000-1800)*100 0.50 8% 2020 3240 depreciation 2020 =0.50*6480

15 43,200 6000 13200 sum of the years explanation sum of the years =1+2+3+4+5 depreciable asset=45000-1800 2020 depreciatio=43200*5/15*5/12 2021 depreciatio = 43200*(5/15*7/12)+(43200*4/15*5/12) 2022 depreciation = (43200*4/15*7/12)+(43200*3/15*5/12) 2023 depreciation = (43200*7/12*3/15)+(43200*5/12*2/15) 2024 depreciation = (43200*7/12*2/150+(43200*5/12*1/15) 2025 depreciation = 43200*1/15*7/12 10320 3100 4560 1344 2021 2024 2025 answer depreciation 2020 6000 2022 10320 2023 3100 13200 4560 1344

year 2020 2021 2022 2023 2024 2025 e) double declining explanation depreciation %=200%/5 40% asset book depreciati value at accumulated on beginning dep 45,000 7500 7500 37,500 15000 22500 22,500 9,000 31500 13,500 5,400 36900 8,100 3,240 40140 4,860 3060 43200 book value ending 37,500 22,500 13,500 8,100 4,860 1,800 answer 2021 2023 2025 2020 7500 2022 9,000 2024 3,240 depreciation 15000 5,400 3060