Question

At the beginning of last​ year, Barrington Corporation purchased a piece of heavy equipment for $ 63,000. The equipment has a life of five years or 100,000 hours. The estimated residual value is $ 3,000. Bremond used the equipment for 19,000 hours last year and 23,000 hours this year. Depreciation expense for year two using​ double-declining-balance (DDB) and​ units-of-production (UOP) methods would be as​ follows:

Answer 1

Answer:

double declining balance depreciation:

$63,000 / 5 years = $12,600 or 20% per year

depreciation expense year 1 = $63,000 x 40% = $25,200

$63,000 - $25,200 = $37,800

depreciation expense year 2 = $37,800 x 40% = $15,120

units of production depreciation:

($63,000 - $3,000) / 100,000 hours = $0.60 per hour

Depreciation expense year 1 = 19,000 hours x $0.60 per hour = $11,400

Depreciation expense year 2 = 23,000 hours x $0.60 per hour = $13,800