The ARC Company bought equipment on January 1, 2016, for $39,000. The equipment
ID: 2482942 • Letter: T
Question
The ARC Company bought equipment on January 1, 2016, for $39,000. The equipment was expected to remain in service for 4 years and to perform 11,000 jobs. At the end of the equipment´s useful life, ARC estimates that its residual value will be $6,000. The equipment performed 1,100 jobs the first year, 3,300 the second year, 4,400 the third and 2,200 the fourth year.
Prepare a schedule of depreciation expense and book value per year for the equipment under the units-of-production depreciation method. Show the computations.
Explanation / Answer
Cost of equipment 39000 Residual value 6000 Depriciable base 33000 Number of units depriciation Year 1 1100 3300 (1100/11000*33000) Year 2 3300 9900 (3300/11000*33000) Year 3 4400 13200 (4400/11000*33000) Year 4 2200 6600 (2200/11000*33000) 11000 33000
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