Calculate the amount of depreciation to report during the year ended December 31

Question

Calculate the amount of depreciation to report during the year ended December 31 for equipment that was purchased at a cost of $72,000 on October 1. The equipment has an estimated residual value of $9,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses (a) straight-line, (b) double-declining-balance, or (c) units-of-production depreciation. (Do not round intermediate calculations.) Depreciation (a) Straight-Line (b) Double-Declining-Balance (c) Units-of-Production

Explanation / Answer

a) Straight Line Method Cost of Equipment on October 1st $             72,000.00 Salvage Value $                9,000.00 Estimated Useful life 5 Years Yearly Depreciation Amount=($72000-$9000)/5 $             12,600.00 Depreciation for 3 months(From 1st Oct to 31st Dec)=$12600*(3/12) $                3,150.00 b) Double Declining Balance Method Cost of Equipment on October 1st $             72,000.00 Salvage Value $                9,000.00 Estimated Useful life 5 Years Depreciation Rate= (1/useful life)*200% Depreciation Rate=(1/5) 0.20 Double Declining Rate=(1/5)*200% 0.40 Double Declining Rate 40.00% Yearly Depreciatio Amount=($72000*40%) 28800 Deprciation for 3 months (From 1st Oct to 31st Dec)=$28800*(3/12) 7200 c) Cost of Equipment on October 1st $             72,000.00 Salvage Value $                9,000.00 Estimated Useful life 5 Years Depreciation Amount Per Hours=($72000-$9000)/20000 Hours 3.15 Depreciation Amount for 3 months=($3.15*1000) $                3,150.00 Depreciation Expense Dec 31st a) Straight line Method $                3,150.00 b) Double Declining Method $                7,200.00 c) Units of Production Method $                3,150.00

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