Calculate the amount of depreciation to report during the year ended December 31

Question

Calculate the amount of depreciation to report during the year ended December 31, 2013, for equipment that was purchased at a cost of $55,000 on October 1, 2013. The equipment has an estimated residual value of $5,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses: (a) straight-line, (b) double-declining-balance, or (c) units-of-production depreciation. (Do not round intermediate calculations.)

straight-line is?

double-declining-balance is?

units of production is?

Explanation / Answer

Hi,

Please find the answer as follows:

Part A: Straight Line Method

Annual Depreciation = (Original Cost - Salvage Value)/Life of the Equipment = (55000 - 5000)/5 = 10000

Depreciation for the Period October 1 2013 to December 31 2013 (3 months) = 10000*3/12 = 2500

Part B: Double Declining Method

Annual Depreciation Rate = 10000/50000*100 = 20%

Depreciation Rate as Per Double Declining Method = 20%*2 = 40%

Depreciation for the Period October 1 2013 to December 31 2013 (3 months) = 55000*.40*3/12 = 5500

Part C: Units of Production

Depreciation for the Period October 1 2013 to December 31 2013 (3 months) =(Original Cost - Salvage Value)*Hours Used During the Period/Total Useful Life in Hours = (55000 - 5000)*1000/20000 = 2500

Thanks.

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