Question

Problem 9-4A a-b (Part Level Submission) Carla Vista Ca. purchased equipment on March 27, 2018, at a cost of $224,000. Management is contemplating the marits of using the diminishing balance or units of production method of depreciation instead of the straight-line method, which it currently uses for other equipment. The new equipment has an estimated residual value of $8,000 and an estimated useful life of either four years or 80,000 units. Demand for the products produced by the equipment is sporadic so the equipment will be used more in some vears than in others. Assume the equipment produces the following number of units each year: 14,800 units in 2018; 20,400 units in 2019, 19.800 units in 2020, 20,000 units in 2021; and 5,000 units in 2022. Carla Vista has a December vear end. (a) Prepare separate depreciation schedules for the life of the equipment using: (Round depreciation per unit to 2 decimal places, e.g. 5.28 and final answers to O decimal places, e.g. 5,275.) Straight line method: Depreciable Depreciation Accumulated Carrying Year Cost Expense Depreciation Amount 215000 $40980.6: 2018 2019 2020 216000 51000 215000 54000 2021 216000 S1000 2022 216000 13019.11 Double-diminishing-balance method: Opening Carrying Depreciation Accumulated Carrying Year Amount Expense Depreciation Amount 2018 2019 2020 2021 2022 Units-of-production method: Depreciation Accumulated Carrying Year Units-of-Production Expense Depreciation Amount 2018 2019 2020 2021 2022

Please help me out :)

Answer 1

A) Straight line method

Basically straight lne method of depreciation refers to depreciating the asset over its useful life in equal amounts irrespective of its producation and usage.So,

depreciation to be charged each year shall be = $224000-$8000/8years= $27000 per year.

Carrying value of the asset refers to the value of the asset after depreciation.

Year	Depreciable cost	Depreciation expense	Accumalated depreciation	Carrying amount
2,018	216,000	27,000	27,000	189,000
2,019	189,000	27,000	54,000	162,000
2,020	162,000	27,000	81,000	135,000
2,021	135,000	27,000	108,000	108,000
2,022	108,000	27,000	135,000	81,000

B)Double diminishing balance method:

Double diminishing depreciation method refers to form of accelerated depreciation wherein depreciation rate is twice as the normal rate charged on the asset.

Depreciation in the earlier years will be high and decreases with the later years.Double-declining balance formula = 2 X Cost of the asset X Depreciation rate

Year	Opening carrying amount	Depreciation expense	Accumalated depreciation	Carrying amount
				216,000
2018	216,000	54,000	54,000	162,000
2019	162,000	40,500	94,500	67,500
2020	67,500	16,875	111,375	50,625
2021	50,625	12,656	124,031	37,969
2022	37,969	9,492	133,523	28,477

C)Units of production method :

The deprecaition per year is charged is charged based on the production / usage each year ie., depreciation for the year =no of units produced in that particular year/ total no. of units*(value of the asset- salvage value).

Year	Units of production	Depreciation expense	Accumalated depreciation	Carrying amount
2018	14800	39960	39960	176040
2019	20400	55080	95040	120960
2020	19800	53460	148500	67500
2021	20000	54000	202500	13500
2022	5000	13500	216000	0