Perdue Company purchased equipment on April 1 for $270,000. The equipment was ex
ID: 2516002 • Letter: P
Question
Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 hours in Year 4.
Required:
Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-activity method, and (c) the double-declining-balance method.
Note: FOR DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar.
a. Straight-line method
b. Units-of-activity method
c. Double-declining-balance Method
Year Amount Year 1 $ Year 2 $ Year 3 $ Year 4 $Explanation / Answer
Req a. STRAIGHT LINE MTHOD: Cost of Asset: 270,000 Salvage value: 9,000 Life of asset: 3 Depreciable amount (cost-Salvage): 261,000 Annual Depreciation (Depreciable Amt/ Life) 87000 Depreciation in Year -1(for 9 months) = 87000*9/12 = 65250 Depreciation in Year-4 (3 months): 87000*3/12= 21750 Year Depreciation 1 65,250 2 87,000 3 87,000 4 21,750 Rreq B: Production life: 18000 hours Depreciation per Hour: Depreciable Amount/ Life = 261,000 /18,000 = $ 14.50 per hour Year Production hours Depreciation @14.50 1 7500 108750 2 5500 79750 3 4000 58000 4 1000 14500 Req C: Rate under DDM (33.33*2) = 66.67% Schedule of depreciation Year BV in Beg. Dep. @66.67% BV at end 1 270000 180000 90000 2 90000 60000 30000 3 30000 20000 10000 4 10000 1000 (B/fig) 9000
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