Question

Layton Company purchased tool sharpening equipment on October 1, 2012, for $108,000. The equipment was expected to have a useful life of three years, or 12,000 operating hours, and a residual value of $7,200. The equipment was used for 1,350 hours during 2012, 4,200 hours in 2013, 3,650 hours in 2014, and 2,800 hours in 2015.Required: Determine the amount of depreciation expense for the years ended December 31, 2012, 2013, 2014, and 2015, by:(a) the straight-line method,(b) units-of-output method, and(c) the double-declining-balance method.Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.

Answer 1

The amount of depreciation expense for the years ended December 31, 2012, 2013, 2014, and 2015, for Layton Company is determined as follows:

(a) the straight-line method:

2012:    $33,600

2013:   $33,600

2014:   $33,600

2015:   $0

(b) the units-of-output method:

2012:    $11,340 (1,350 x $8.40)

2013:   $35,280 (4,200 x $8.40)

2014:   $30,660 (3,650 x $8.40)

2015:   $23,520 (2,800 x $8.40)

(c) the double-declining-balance method:

2012:    $71,993 ($108,000 x 0.6666)

2013:   $24,002 ($36,007 x 0.6666)

2014:   $4,805 ($12,005 - 7,200))

2015:   $0

Data and Calculations:

Cost of equipment = $108,000

Useful life = 3 years

Operating hours = 12,000

Residual value = $7,200

Depreciable amount = $100,800 ($108,000 - $7,200)

Straight-line depreciation rate = $33,600 per year ($100,800/3)

Units-of-output method rate = $8.40 per hour ($100,800/12,000)

Double-declining-balance method rate = 66.6666 (100/3)

Thus, the depreciation expenses for the years ended December 31, 2012, 2013, 2014, and 2015, for Layton Company have been determined using (a) the straight-line method, (b) the units-of-output method, and (c) the double-declining-balance method.

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