Computing depreciation-three methods Craclling Fried Chicken bought equipment on

Question

Computing depreciation-three methods Craclling Fried Chicken bought equipment on January 2, 2016, for $21,000. The equipment was expected to remain in service for four years and to perform 3,600 fry jobs. At the end of the equipment's useful life, Crackling's estimates that its residual value will be $3,000. The equipment performed 360 jobs the first year, 1,080 the second year, 1,440 the third, and 720 the fourth year. Requirements 1. Prepare a schedule of depreciation expense,accumulated depreciation, and book value per year for the equipment under the three depreciation methods. Show your com- putations. Note: Three depreciation schedules must be prepared.

Explanation / Answer

Striaght line method :

stright line dep = (21000-3000)/4 = 4500

2) Unit of production method :

Depreciation rate = (21000-3000)/3600 = 5 per job

3) double decline method :

straight line rate = 100/4=25%

double decline rate = 25*2=50%

Year depreciation accumlated depreciation Book value 1 4500 4500 16500 2 4500 9000 12000 3 4500 13500 7500 4 4500 18000 3000 Total 18000

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