Question

Sushi Corp. purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX, at a cost of $21,600. The equipment has an estimated residual value of $1,200. The equipment is expected to process 256,000 payments over its three-year useful life. Per year, expected payment transactions are 61,440, year 1; 140,800, year 2; and 53,760, year 3. Required: Complete a depreciation schedule for each of the alternative methods. 1. Straight-line. 2. Units-of-production. 3. Double-declining-balance.

Answer 1

21600 1200 20400 Cost of the Equipment Less : Salvage Value Depreciable Value of the Machine Life of the Machine Life of the Equipement (Units) Straight Line Method Annual Depreciation : Depreciable Value / Life annual Depreciation :20400/3 256000 6800 Income Statement Depreciation Expenses Cost Year At Acquissition Balance Sheet Accumulated Depreciation Book Value 21600 21600 6800 14800 21600 13600 8000 21600 20400 1200 WN 6800 6800 6800

Units of Activity Method Annual Depreciation : Depreciable Value / Life Depreciation Per unit : 20400/256000 0.0797 Income Statement Depreciation Expenses Cost Year At Acquissition Balance Sheet Accumulated Depreciation Book Value 21600 21600 4896 16704 21600 16116 5484 21600 20400 1200 4896 11220 4284

Double Declining balance Method Rate of Depreciation = (1/ Life) *2 Depreciation Rate = (1/3)*2 66.667% Double Declining balance Method Book Value Depreciation % Depreciation Book value 1 21600 67% 14400 7200 2 7200 67% 4800 2400 2400 67% 1200 12001 Year Income Statement Depreciation Expenses Cost Year At Acquissition Balance Sheet Accumulated Depreciation Book Value 216001 21600 14400 7200 21600 19200 2400 21600 20400 1200 14400 4800 1200 3