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eBook Calculator Depreciation by Three Methods; Partial Years Perdue Compeny purchased equipment on Apri 1 for $270,000. The equipment was expected to have a useful life of three operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours i Year 3, and 1,000 hours in Year 4, equipment was expected to have a useful life af three years or 18,000 in Year 2, 4,000 hours in Required: Determine tha 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 output method, and (c) the double-daclining-balance method. Note: FOR DECLINING BALANCE ONLY, round the answer for sach year to the nearest whole dollar a. Straight-line method Year Year 1 Year 2 Year 3 Year 4 Amount b. Units-of-output method Year i Year 2 0 901

Explanation / Answer

Cost = $270,000 Useful life = 3 yrs or 18000 operating hrs Residual Value = $9000 Straight Line Method Dep Depreciation as per SLM mthod = (Cost - residual Value)/useful life =[270000-9000]/3yrs =$ 87000/year Year 1 = $87000*9months(apr-dec)/12months =$68250 Year 2 = $87000 Year 3 = $87000 Year 1 = $87000*3months(Jan - Mar)/12months =$21750 Unit of production Depreciation cost per unit = (Cost of the asset - residual Value)/total hrs =[270000-9000]/18000 $14.5 /hrs Deprciation for year 1 = depreciation per hr * total hrs used in yr 1 =$14.5*7500 =$108750 Deprciation for year 2 = depreciation per hr * total hrs used in yr 2 =$14.5*5500 =$79750 Deprciation for year 3 = depreciation per hr * total hrs used in yr 3 =$14.5*4000 =$58000 Deprciation for year 4 = depreciation per hr * total hrs used in yr 4 =$14.5*1000 =$14500 Double Declining balance method Depreciation factor is equal to 2 since it is double declining Dep rate using SLM =100%/useful life = 100%/3 = 33.33% Depreciation Rate = Depreciation Factor x Straight-Line Depreciation Percent =2*33.33% = 66.66% Depreciation for a yr 1 = Depreciation Rate x Book Value at Beginning of the Period =66.66%*270000*9/12months 135000 $ Depreciation for a yr 2 = Depreciation Rate x Book Value at Beginning of the Period =66.66%*(270000-135000) 90000 $ Depreciation for a yr 3 = Depreciation Rate x Book Value at Beginning of the Period =66.66%*(270000-135000-90000) 30000 $ Depreciation for a yr 4 = Depreciation Rate x Book Value at Beginning of the Period =66.66%*(270000-135000-90000-30000)*3/12 2500

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