Question

Calculate the amount of depreciation to report during the year ended December 31, 2013, for equipment that was purchased at a cost of $43,000 on October 1, 2013. The equipment has an estimated residual value of $3,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses: (a) straight-line, (b) double-declining-balance, or (c) units-of-production depreciation. (Do not round intermediate calculations.)
1) Straightline

2) Double-Declining-Balance

3) Units of Production

The depreciation amounts are needed for each of those 3 based on the information provided. Thanks!

Answer 1

Answer:

1) Straightline   $ 2000

2) Double-Declining-Balance  $ 4000

3) Units of Production  $ 2000

Explanation:

Cost of equipment $43,000

Residual value of equipment  $3,000

Useful life of equipment 5 years

Formula:

1) Straight Line Method Depreciation = Cost - Salvage Value/ Useful Life

Straight Line Method Depreciation = $43,000 -$3,000/5=$ 8000

The amount of depreciation using Straight Line Method Depreciation for the year ended December 31, 2013, is

($ 8000/12)*3= $ 2000

The straight Line depreciation expense for 3 months is $ 2000

2) Straight Line Rate= 100%

Useful Life= 100%/5 = 20%

Double Declining Method = 2 * Straight Line Rate

Double Declining Method = 2 * Straight Line Rate= 2*20%= 40%

Year     Book Value      Dep          Dep               Accu.       Book

                                      Rate         Expense      Dep.          Value

1           40,000             40              16000          16000         24000

Depreciation Expense for the whole year would be $ 16000.

Depreciation expense using double declining method for 3 months would be = ($ 16000/12 )*3= $ 4000

3) Depreciation per unit= (Cost -Salvage value) / Total units of production

Depreciation per unit=  $43,000 -$3,000/20,000=40,000/20,000=2

Depreciation Expense = Depreciation per unit * No of Units Produced

Depreciation Expense =  2*1000= $ 2000

Depreciation Expense using  Units of Production method would be $ 2000 for 3 months. i.e on 31st Oct 2013