On January 1, 2013, Canseco Plumbing Fixtures purchased equipment for $30,000. R

Question

On January 1, 2013, Canseco Plumbing Fixtures purchased equipment for $30,000. Residual value at the end of an estimated four-year service life is expected to be $2,000. The company expects the machine to operate for 10,000 hours. The machine operated for 2,200 and 3,000 hours in 2013 and 2014, respectively.

1)Calculate depreciation expense for 2013 and 2014 using sum-of-the-years'-digits method

2013 and 2014 showing depreciable base x rateper year = depreciation expense show all answers

2)Calculate depreciation expense for 2013 and 2014 using double-declining balance method.

a) 2013 and 2014 beginning of period book value-depreciation rate-depreciation expense and end of period accumulated depreciation and book value for each year

3)Calculate depreciation expense for 2013 and 2014 using units-of-production method (using machine hours).

calcualte 2013 and 2014 depreciation expense using units of production method (using machine hours)

a) depreciation per machine hour for each year?

b) machine hours in 2013

c) depreciation in 2013

d) machine hours in 2014

e) depreciation in 2014

Explanation / Answer

Depreciable amount is $ (30,000-2000) = $28,000

1.Sum of the years' digits method

Therefore, the depreciation for 2013 and 2014 using sum of the years' digits method are $ 11,200 and $ 8,400 respectively.

2. Double declining method : Since the asset life is 4 years, the straight line rate of depreciation would have been 100/4 = 25%. In double declining method, the rate is doubled to 50%. Therefore depreciation for 2013 is 50% of $ 28,000 = $ 14,000, accumulated depreciation is $ 14,000, and book value of the asset is $ (30,000-14,000) =

$ 16,000

For 2014, the depreciation is 50% of (28,000-14,000) = $ 7,000, accumulated depreciation is $ 21,000, and the book value of the asset is $ (16000-7000) = 9,000

3.Units of production method:

2013 depreciation expense is 2200/10,000 x 28,000 = $ 6,160, accumulated depreciation $ 6,160, Book value of asset $ (30,000- 6,160 ) = $ 23,840

2014 depreciation expense is 3000/10,000 x 28,000 = $ 8,400, accumulated depreciation $ ( 6160 + 8400 ) = $ 14,560. Book value of asset $ (30,000 -14560) = $15,440

Depreciation per machine hour is 28,000/10,000 = $ 2.8

Year Depreciation Accumulated depreciation Book value of asset 1 4/10 x28,000 = $ 11,200 11,200 18,800 2 3/10 x 28,000 = $ 8400 19,600 10,400 3 2/10 x 28,000 = $ 5,600 25,200 4,800 4 1/10 x 28,000 = $ 2,800 28,000 2,000 10

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