Answer:
a) Calculate the amount of depreciation expense that Evers should record each year of its useful life under the following assumptions. Show your workings.
(1) Straight-line method
depreciable value = $180,000 - $10,000 = $170,000 / 4 = $42,500 per year (same for each year)
(2) Double declining balance method
depreciation expense year 2014 = $180,000 x 1/4 x 2 = $90,000
depreciation expense year 2015 = $90,000 x 1/4 x 2 = $45,000
depreciation expense year 2016 = $45,000 x 1/4 x 2 = $22,500
depreciation expense year 2017 = $22,500
(3) Units-of-activity method and estimates that the useful life of machine is 125,000 units. Actual usage is as follows: 2014, 45,000 units; 2015, 35,000 units; 2016, 25,000 units; 2017, 20,000 units.
depreciation expense per unit = $170,000 / 125,000 units = $1.36
depreciation expense year 2014 = $1.36 x 45,000 = $61,200
depreciation expense year 2015 = $1.36 x 35,000 = $47,600
depreciation expense year 2016 = $1.36 x 25,000 = $34,000
depreciation expense year 2017 = $1.36 x 20,000 = $27,200
b) Which method used to calculate depreciation reports the highest amount of depreciation expense in year 1?
double declining balance
The highest in year 4?
straight line method
The highest total amount over the 4-year period?
double declining balance
