Question

Hearty Fried Chicken bought equipment on January 2, 2016, for $42,000. The equipment was expected to remain in service for four years and to perform 7,200 fry jobs. At the end of the equipment's useful life, Hearty estimates that its residual value will be $6,000. The equipment performed 720 jobs the first year, 2,160 the second year, 2,880 the third year, and 1,440 the fourth year Requirements Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. Note: Three depreclation schedules must be prepared Which method tracks the wear and tear on the equipment most dosely? 2. Requirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. Note: Three depreciation schedules must be prepared Begin by preparing a depreciation schedule using the straight-ine method. Straight-Line Depreciation Schedule Depreciation for the Year Asset Depreciable Depreciation Depreciation Accumulated Book Cost Dato Cost Rate Expense Depreciation Value 1-2-2016 12-31-2016 12-31-2017 12-31-2018 12-31-2019 Before completing the units-of-production depreciation schedule, calculate the depreciation expense per unit. Depreciation per unit )r Prepare a depreciation schedule using the units-of-production method

Answer 1

Requirement 1

Units of Production Depreciation Schedule

Date	Asset cost	Depreciation For the Year			Accumulated Depreciation	Book Value
		Depreciation p.u	No. Of jobs	Depreciation Expense
01-02-2016	$ 42,000.00	-	-	-	-	$          42,000.00
12-31-2016		$               5.00	$     720.00	$     3,600.00	$       3,600.00	$          38,400.00
12-31-2017		$               5.00	$ 2,160.00	$   10,800.00	$     14,400.00	$          27,600.00
12-31-2018		$               5.00	$ 2,880.00	$   14,400.00	$     28,800.00	$          13,200.00
12-31-2019		$               5.00	$ 1,440.00	$     7,200.00	$     36,000.00	$            6,000.00

*Depreciation p.u = Cost-Residual Value/Total jobs produced

                                 =$ (42000-6000)/7200 jobs

                                  =$ 5

Double-Decline Balance Depreciation Schedule

Date	Asset cost	Depreciation For the Year			Accumulated Depreciation	Book Value
		Book Value	DDB Rate	Depreciation Expense
01-02-2016	$ 42,000.00	-	-	-	-	$          42,000.00
12-31-2016		$    42,000.00	21%	$     9,000.00	$       9,000.00	$          33,000.00
12-31-2017		$    33,000.00	27%	$     9,000.00	$     18,000.00	$          24,000.00
12-31-2018		$    24,000.00	38%	$     9,000.00	$     27,000.00	$          15,000.00
12-31-2019		$    15,000.00	60%	$     9,000.00	$     36,000.00	$            6,000.00

*Depreciation expense = Cost-Residual Value/useful life of Asset

                                            = $ (42000-6000)/4 years

                                           = $ 9000

Requirement 2

Double-Decline Balance Depreciation method tracks the wear & tear most closely.