Question

Golden Fried Chicken bought equipment on January 2, 2018, for $21,000. The equipment was expected to remain in service for four years and to operate for 6,000 hours. At the end of the equipment's useful life, Golden estimates that its residual value will be $3,000. The equipment operated for 600 hours the first year, 1,800 hours the second year, 2,400 hours the third year, and 1,200 hours the fourth year. Read the requirements. Requirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. Begin by preparing a depreciation schedule using the straight-line method. Straight-Line Depreciation Schedule Depreciation for the Year Asset Cost Depreciable Cost Useful Life Depreciation Expense Accumulated Depreciation Book Value Date 1-2-2018 12-31-2018 12-31-2019 12-31-2020 12-31-2021

Answer 1

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Golden Fried Chicken
Cost of Equipment	21,000.00	A
Residual Value	3,000.00	B
Depreciable Value	18,000.00	C=A-B
				Depreciation for the year
			Date	Asset Cost	Depreciable cost	Useful life	Depreciation Expense	Accumulated depreciation	Net Book Value
			1/2/2018	21,000.00					21,000.00
			12/31/2018		18,000.00	4.00	4,500.00	4,500.00	16,500.00
			12/31/2019		18,000.00	4.00	4,500.00	9,000.00	12,000.00
			12/31/2020		18,000.00	4.00	4,500.00	13,500.00	7,500.00
			12/31/2021		18,000.00	4.00	4,500.00	18,000.00	3,000.00
Units of Production Method
Depreciable Value	18,000.00	See C		Depreciation for the year
Life (Hours)	6,000.00	F	Date	Asset Cost	Depreciable cost	Depreciation Expense	Accumulated depreciation	Net Book Value
Depreciation per Mile	3.00	G=C/F	1/2/2018	21,000.00				21,000.00
	H	I=H*G	12/31/2018		18,000.00	1,800.00	1,800.00	19,200.00
	Miles	Depreciation	12/31/2019		18,000.00	5,400.00	7,200.00	13,800.00
Year 1	600.00	1,800.00	12/31/2020		18,000.00	7,200.00	14,400.00	6,600.00
Year 2	1,800.00	5,400.00	12/31/2021		18,000.00	3,600.00	18,000.00	3,000.00
Year 3	2,400.00	7,200.00
Year 4	1,200.00	3,600.00
					M	N=M*L
Double Declining Method				Asset Cost	Depreciable cost	Depreciation Expense	Accumulated depreciation	Net Book Value
Cost of Equipment	21,000.00	See A	1/2/2018	21,000.00				21,000.00
Life	4.00	See D	12/31/2018		21,000.00	10,500.00	10,500.00	10,500.00
Annual depreciation	5,250.00	J=A/D	12/31/2019		10,500.00	5,250.00	15,750.00	5,250.00
Depreciation rate	25.00%	K=J/A	12/31/2020		5,250.00	2,250*	18,000.00	3,000.00
Double Depreciation %	50.00%	L=K*2
Depreciation for 31st December 2020 is reduced to $ 2,2250 because net book value cannot be less than residual value.