Weir Service Company purchased a copier on January 1, 2014, for $15,100 and paid

Question

Weir Service Company purchased a copier on January 1, 2014, for $15,100 and paid an additional $440 for delivery charges. The copier was estimated to have a life of four years or 1,000,000 copies. Salvage was estimated at $1,300. The copier produced 226,000 copies in 2014 and 247,000 copies in 2015. Required a. Compute the amount of depreciation expense for the copier for calendar years 2014 and 2015, using Straight-line method. b. Compute the amount of depreciation expense for the copier for calendar years 2014 and 2015, using Units-of-production method. (Round "Cost per unit" to 3 decimal places.) c. Compute the amount of depreciation expense for the copier for calendar years 2014 and 2015, using Double-declining-balance method.

Explanation / Answer

a.

Cost of copier = Purchase price + Delivery charges = $15,100 + $440 = $15,540

Depreciable cost = Cost of machine - Salvage value = $15,540 - $1,300 = $14,240

Annual depreciation = Depreciable cost / Useful life = $14,240/4 = $3,560

Depreciation for years 2014 and 2015 shall be $3,560 each.

b.

Depreciation per unit of production = Depreciable cost/Estimated capacity = $14,240/1,000,000 = $0.014 per copy

Depreciation for year 2014 = $0.014 * 226,000 copies = $3,218.24

Depreciation for year 2015 = $0.014 * 247,000 copies = $3,517.28

c.

Depreciation rate = Straight line depreciation rate * 2 = 100%/Useful life * 2 = 100%/4 * 2 = 50%

Depreciation rate = Cost of machine * 50% = $15,540 * 50% = $7,770

Depreciation for 2014 = $15,540 * 50% = $7,770

Ending book value for 2014 = Cost of machine - Depreciation for 2014 = $15,540 - $7,770 = $7,770

Depreciation for 2015 = $7,770 * 50% = $3,885

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