Question

Crispy Fried Chicken bought equipment on January 2, 2018, for $33,000. The equipment was expected to remain in service for four years and to operate for 6.750 hours. At the end of the equipments neue Crispy estimates that is rival will be 56.000 The equipment operated for 675 hours the first year 2,025 hours the second year 2.700 hours the third year, and 1.350 hours the fourth year Requirement Prepare a schedule of depreciation expense accumulated depreciation and book value per year for the equipment under the the depreciation methods straighine, units of production and double declining balance. Show your computations. Note Three depreciation schedules must be prepared Begin by preparing a depreciation scheduling the gene method Straight Line Depreciation Schedule Depreciation for the Year Asset Depreciable Us Depreciation Accumulated Book De Cel Cos Expense Deprecia 1-2-2018 5 . 750 26350 10 500

Answer 1

Solution:

Calculation of Depreciation using Double- Declining Balance method:

In this method the rate of depreciaiton is double the rate used in straight line depreciation

Rate of depreciation = (1 / useful life) x 2

= (1/4 years ) x 2

= 0.25 x 2

= 50%

| J A B с D E F G H Depreciation for the year Book Depreciation Accumulated Date Asset cost Value DDB Rate Expense Depreciation Book Value 1/2/2018 33,000.00 33,000.00 12/31/2018 33,000.00 50% 16,500.00 16,500.00 16,500.00 12/31/2019 16,500.00 50% 8,250.00 24,750.00 8,250.00 12/31/2020 8,250.00 x 50% 4,125.00 28,875.00 4,125.00 12/31/2021 4,125.00 50% 2,062.50 30,937.50 2,062.50 But , since the residual value is $ 6,000 we cant depreciate the asset below $ 6,000. In this case, the book value has come down to $ 2062.5, so we have to restrict the depreciation in 3rd and 4th year so that book value remains at $ 6,000 Book Value in Book Beginning Depreciation Accumulated Value (b) Date Year (a) (a)-(b) Depreciation 12/31/2020 3 8,250.00 2,250.00 27,000.00 6,000.00 12/31/2021 4 6,000.00 27,000.00 6,000.00 So, final answer is: Depreciation for the year Book Depreciation Accumulated Date Asset cost Value DDB Rate Expense Depreciation Book Value 1/2/2018 33,000.00 33,000.00 12/31/2018 33,000.00 50% 16,500.00 16,500.00 16,500.00 12/31/2019 16,500.00 50% 8,250.00 24,750.00 8,250.00 12/31/2020 8,250.00 2,250.00 27,000.00 6,000.00 12/31/2021 6,000.00 27,000.00 6,000.00