Orchid Lake Company purchased new equipment for $8,100 on February 1, 2017. Othe

Question

Orchid Lake Company purchased new equipment for $8,100 on February 1, 2017. Other information is as follows: Part 2: Caleulation of Depreciation Expense (30 Points) The equipment had a useful life of 3 years or 11,700 total hours The equipment has a salvage value equal to $4,200 at the end of its useful life. Orchid Lake Company uses the calendar year as its fiscal year. Instructions: PLEASE SHOW YOUR WORK a. Compute the depreciation expense for 2017 and 2018 using the straight-line depreciation method. 2017 2018 Depreciation expense Computations: 2017: 2018: b. Compute the depreciation expense for 2017 and 2018 using the double-declining- balance depreciation method. 2017 2018 Depreciation expense. Computations: 2017: 2018: c. The equipment was used for 2,925 total hours in 2017 and for 3,510 total hours in 2018. Compute the depreciation expense for 2017 and 2018 using the units-of- production depreciation method. 2017 2018 Depreciation expense: Computations: 2017: 2018:

Explanation / Answer

Straight line dep 2017 2018 Dep exp=(8100-4200)/3 Ans a 1300 1300 Computation 2017 Dep exp=(8100-4200)/3 1300 2018 Dep exp=(8100-4200)/3 1300 ans b Double Declining balance DDB rate=1/3*200% 0.67 2017 2018 Dep exp 5400 1800 Computation 2017 (8100*.667) 5400 2018 (8100-5400)*.67 1800 ans c 2017 2018 Dep exp 975 1170 Computation Dep rate per hour =(8100-4200)/11700 0.333333 2017 dep exp 2925*.333 975 2018 dep exp 3510*.333 1170

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