(L.OBJ. 2) Computing depreciation—three methods [10—15 min]
Mama's Fried Chicken bought equipment on January 2, 2010, for $15,000. The equipment was expected to remain in service 4 years and to perform 3,000 fry jobs. At the end of the equipment’s useful life, Mama’s estimates that its residual value will be $3,000. The equipment performed 300 jobs the first year, 900 the second year, 1,200 the third, and 600 the fourth year.
Requirements
1. Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under double-declining-balance depreciation, the company switched to the straight-line method. Show your computations. Note: 3 depreciation schedules must be prepared.
2. Which method tracks the wear and tear on the equipment most closely?
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