Question

Required information [The following information applies to the questions displayed below.] On January 1, 2021, the Allegheny Corporation purchased equipment for $162,000. The estimated service life of the equipment is 10 years and the estimated residual value is $8,000. The equipment is expected to produce 350,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. 1. Straight line. Straight-Line Depreciation 1. Choose Denominator: Choose Numerator: = Annual Depreciation Expense = Depreciation Expense Depreciation Expense 2021 2022

Answer 1

1) straight line

	Choose numerator	/	Choose denominator	=	Annual depreciation expense
	Depreciable base	/	Useful life	=	Annual depreciation expense
	(162000-8000) = 154000	/	10	=	15400
	Depreciation expense
2021	15400
2022	15400

2) Double decline

	Depreciation for the period			End of period
Annual period	Beginning of period book value	Depreciation rate	Depreciation expense	Accumulated depreciation	Ending book value
2021	162000	20%	32400	32400	129600
2022	129600	20%	25920	58320	103680

3) Unit of production

(Original cost-salvage value)/estimated production
(162000-8000/350000) = 0.44
Calculate depreciation expense : 2021
Depreciation per unit rate	0.44
unit produced in 2021	42000
Depreciation in 2021	18480
Calculate 2022 depreciation expense
Depreciation per unit rate	0.44
Unit produced in 2022	37000
Depreciation in 2022	16280