At the beginning of 2015, your company buys a $33,200 piece of equipment that it
ID: 2431258 • Letter: A
Question
At the beginning of 2015, your company buys a $33,200 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 4,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 45,000 units in 2015, 53,000 units in 2016, 46,000 units in 2017, and 56,000 units in 2018. Required: a. Determine the depreciable cost. b. Calculate the depreciation expense per year under the straight-line method. c. Use the straight-line method to prepare a depreciation schedule. d. Calculate the depreciation rate per unit under the units-of-production method. (Round your answer to 2 decimal places.) e. Use the units-of-production method to prepare a depreciation schedule. (Do not round your Depreciation rate per unit.) Explanation: a. Depreciable cost = Cost – Residual value = $33,200 – $4,000 = $29,200 b. Depreciation expense per year = (Cost – Residual value) × (1 ÷ Useful life) = ($33,200 – $4,000) × 1/4 = $7,300 d. Depreciation rate = (Cost – Residual value) ÷ Estimated total production = ($33,200 – $4,000) /200,000 units = $0.146 or 14.6¢ per unit e. Year Depreciation Expense Acquisition cost 2015 $ 6,570 (14.6¢ × 45,000) 2016 $ 7,738 (14.6¢ × 53,000) 2017 $ 6,716 (14.6¢ × 46,000) 2018 $ 8,176 (14.6¢ × 56,000)
Explanation / Answer
Req a: Depreciable cost: Cost of equipment 33200 Less: Salvage value 4000 Depreciable cost: 29200 Req b: Depreciable cost 29200 Divide: Life of equipment 4 Annual depreciation 7300 Req c: Year Annual dep Accumulated BV at the end Depreciation 0 33200 1 7300 7300 25900 2 7300 14600 18600 3 7300 21900 11300 4 7300 29200 4000 Req d: Depreciable cost 29200 Divide: Total production 200000 Depreciation rate per unit 0.146 Req e; Year Production Rate Annual dep 1 45000 0.146 6570 2 53000 0.146 7738 3 46000 0.146 6716 4 56000 0.146 8176
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