Tails Corporation purchased and installed electronic payment equipment at its dr
ID: 2579423 • Letter: T
Question
Tails Corporation purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX, at a cost of $45,900. The equipment has an estimated residual value of $3,600. The equipment is expected to process 269,000 payments over its three-year useful life. Per year, expected payment transactions are 64,560, year 1; 147,950, year 2; and 56,490, year 3. Required: Complete a depreciation schedule for each of the alternative methods. (Do not round intermediate calculations.) 1. Straight-line. Income Statement Balance Sheet Depreciation Expense Accumulated Book Value Depreciation Year Cost At acquisition 2. Units-of-production Income Statement Balance Sheet Depreciation Expense Accumulated Depreciation Book Value Year Cost At acquisitionExplanation / Answer
Accumulated depreciation = Cummulative depreciation
Book value = Cost - Accumulated depreciation
1. Depreciation under straight line method = (cost - estimated residual value) / estimated useful life
= (45,900 - 3,600) / 3
= 14,100
2. Depreciation under units of production method = (cost - salvage value) * payment transactions this year / total expected payment transactions
Deprecaition in the year 1 = (45,900 - 3,600) * 64,560 / 269,000
= 10,152
Deprecaition in the year 2 = (45,900 - 3,600) * 147,950 / 269,000
= 23,265
Deprecaition in the year 3 = (45,900 - 3,600) * 56,490 / 269,000
= 8,883
3. Depreciation under double declining balance method = (cost - accumulated depreciation at the beginning of the year) / estimated useful life * 2
Depreciation in the year 1 = (45,900 - 0) / 3 * 2 = 30,600
Depreciation in the year 2 = (45,900 - 30,600) / 3 * 2 = 10,200
Depreciation in the year 3 = (45,900 - 30,600 - 10,200) / 3 * 2 = 3,400
(*) Depreciation cannot be made below the residul value.
Depreciation in the year 3 = 45,900 - 3,600 - 40,800 = 1,500.
Year Depreciation expense Cost Accumulated depreciation Book value At acquision 1 14,100 45,900 14,100 31,800 2 14,100 45,900 28,200 17,700 3 14,100 45,900 42,300 3,600Related Questions
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