Problem 9-4A a-b widhorse Co purchased equipment on March 27, 2018, at a cost of

Question

Problem 9-4A a-b widhorse Co purchased equipment on March 27, 2018, at a cost of $264,000. Management is contemplating the merits of using the diminishing-balance or units-of-production methed of depreciation instead of the straight-line method, which iR currently uses for other equipment. The new equipment has an estimated residual value of $8,000 and an estimated useful fe of ether four years or 8o,000 units. Demand for the produts produced by e equipment is sporadic so the equipment will be used more in some years than in others. Assume the equipment preduces the following number of units each year: 14,600 units in 2018 20,600 units in 2019; 19,80o units in 202 20,000 unts in 2021; and 5,000 units in 2022 wadhorse has December year e d Prepare separete ecaten seheddes for the Me of the equipment using: (Round depreciation per unit te 2 decimal places, e. s.38 and final answers to O decimal places,·g·s,275.) Straight-line method Year Cost 264,000 201256,0004,064000 192,000 2019 192,0004,00128,000 12,000 2020 2021 022

Explanation / Answer

SLM Cost of equipment 264000 Less: Salvage value 8000 Depreciable amount 256,000 Divide: Life 4 Annual depreciation 64,000 Dep for 2018 (64000*9/12) 48000 Dep Schedule under SLM Year Carrying Dep Accumulated Carrying Amount Expense Dep Amount 264000 2018 264000 48000 48000 216000 2019 216000 64000 112000 152000 2020 152000 64000 176000 88000 2021 88000 64000 240000 24000 2022 24000 16000 256000 8000 DDb: Rate of Dep under SLM (100/4): 25% rate of DDb: 25*2 = 50% Dep in 2018 for 9 months: 264000*50% *9/12 = 99000 Dep Schedule under DDB Year Carrying Dep Accumulated Carrying Amount Expense Dep Amount 264000 2018 264000 99000 99000 165000 2019 165000 82500 181500 82500 2020 82500 41250 222750 41250 2021 41250 20625 243375 20625 2022 20625 12625 256000 8000 Unit of Production: Depreciation amount 256000 Divide: Life:                   80000 Dep per unit 3.20 per unit. Depreciation in years: 2018 (14600*3.20) 46720 2019 (20600*3.20) 65920 2020 (19800*3.20) 63360 2021 (20000*3.20) 64000 2022 (5000*3.20) 16000 Dep Schedule under Units of Production Year Carrying Dep Accumulated Carrying Amount Expense Dep Amount 264000 2018 264000 46720 46720 217280 2019 217280 65920 112640 151360 2020 151360 63360 176000 88000 2021 88000 64000 240000 24000 2022 24000 16000 256000 8000 Comparison SLM Units of Prod DDB Total depreciation expense 256000 256000 256000 Accumulated dep 256000 256000 256000

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