Question

Sushi corp. purchased and installed electronic payment equipment at its drive-in restaurants in san marcos, tx, at a cost of $51,300. the equipment has an estimated residual value of $2,700. the equipment is expected to process 275,000 payments over its three-year useful life. per year, expected payment transactions are 66,000, year 1; 151,250, year 2; and 57,750, year 3.
Required:
Complete a depreciation schedule for each of the alternative methods.

1. Straight-line.
2. Units-of-production.
3. Double-declining-balance.


Income Statement Balance Sheet
Year Depreciation Expense Cost Accumulated Depreciation Book Value
At acquisition
1
2
3

Answer 1

Answer:

Sushi Corp.

Depreciation Schedule:

            Income Statement   Balance Sheet

Year Depreciation Expense  Cost          Accumulated     Book Value

                                                                 Depreciation

At acquisition                          $51,300

Straight-line method:

1             $16,200                   $51,300        $16,200            $35,100

2           $16,200                   $51,300        $32,400            $18,900

3          $16,200                   $51,300        $48,600             $2,700

Units-of-production method:

1              $11,664                   $51,300        $11,664             $39,636

2           $26,730                   $51,300        $38,394            $12,906

3           $10,206                   $51,300        $48,600             $2,700

Double-declining-balance method:

1            $34,371                   $51,300          $34,371               $16,929

2           $11,342                   $51,300          $45,713                $5,587

3          $2,887                    $51,300        $48,600                $2,700

Explanation:

a) Data and Calculations:

Cost of electronic payment equipment = $51,300

Residual value = $2,700

Depreciable amount = $48,600 ($51,300 - $2,700)

Volume of payments = 275,000

Useful life = 3 years

Year 1 expected payment transaction = 66,000

Year 2 expected payment transaction = 151,250

Year 3 expected payment transaction = 57,750

b) Straight-line method:

Depreciation expense per year =  $16,200 ($48,600/3)

b) Units-of-production method:

Depreciation expense per:

Year 1 = 66,000/275,000 * $48,600 = $11,664

Year 2 = 151,250/275,000 * $48,600 = $26,730

Year 3 = 57,750/275,000 * $48,600 = $10,206

c) Double-declining-balance method:

Depreciation rate = 100/3 * 2 = 67%

Depreciation expense per:

Year 1 = $51,300 * 67% = $34,371

Year 2 = $16,929 * 67% =   11,342

Year 3 = $2,887 ($5,587 - $2,700)