Computation of Depreciation Expense Limestone Construction purchased a concrete

Question

Computation of Depreciation Expense

Limestone Construction purchased a concrete mixer on July 15, 20Y1. Company officials revealed the following information regarding this asset and its acquisition:

The concrete mixer was operated by construction crews in 20Y1 for a total of 6,500 hours, and it produced 49,500 yards of concrete.

It is company policy to take a half-year's depreciation on all assets for which it used the straight-line or double-declining-balance depreciation method in the year of purchase.

A.) Calculate the resulting depreciation expense for 20Y1 under each of the following methods. When required, round your calculations to five decimal places and round your final answers to the nearest dollar:

1)Double-declining-balance

2)Productive-output

3)Service-hours

4)Straight-line

Explanation / Answer

Depreciation expense is as follows:

1)

Double declining balancing method:

= ($210,000-$20,000)/9

= $21,111

Rate of depreciation = 10%

Rate under double declining method = 10%*2 = 20%

Depreciation under double declining method = (210,000-20,000)*20%

=$38,000

2)

Productive output basis:

= ($210,000-$20,000)*49,500/375,000

= $25,080

3)

Service hour’s basis:

= ($210,000-$20,000)*6,500/50,000

=$24,700

4)

Straight line basis:

= ($210,000-$20,000)/9

= $21,111

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