Question

Required information (The following information applies to the questions displayed below.) On October 1, 2021, the Allegheny Corporation purchased equipment for $148,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 260,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. 2. Double-declining-balance. Choose Numerator: Cost Minus Residual Double-Declining-Balance Method * Choose Denominator: * Double the Straight-line Rate * Fraction of Year Fraction of Year Depreciation Expense = Depreciation Expense Formula Amount for 2021 $ 20 % 140,600 148,000 x 140,600 3/12 12/12 Amount for 2022 $ 20 % $ 112,480

Answer 1

Calaculation of Depreciation for 2021 and 2022 under each of the following methods:

Double-Declining balance:

-	Choose Numerator	×	Choose Denominator	×	Fractions of the year	=	Depreciation expense
Formula	Cost minus residual value	×	Double the staraight line depreciation rate	×	Fraction of the year	=	Depreciation expense
Amount for 2021	$143000 ($148000-$5000)	×	20%	×	3/12	=	$7150
Amount for 2022	$143000 ($148000-$5000)	×	20%	×	9/12	=	$21450
	$114400 ($143000-$28600)	×	20%	×	3/12	=	$5720
							$27170

*Straight line Depreciation rate

= 100%/useful life = 100%/10 = 10%

Units of production:

Units of production, Depreciation
Depreciation per unit = (cost - salvage value) ÷ Estimated production units = ($148000 - $5000) ÷ 260000 units = $143000 ÷ 260000 = $0.55 per unit
Calaculation of 2021 Depreciation expense
Depreciation per unit rate	$0.55
Units produced in 2021	13000
Depreciation in 2021 ($0.55×13000)	$7150
Calaculation of 2022 Depreciation expense
Depreciation per unit rate	$0.55
Units produced in 2022	28000
Depreciation in 2022 ($0.55×28000)	$14000

_____×_____

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