Question

Pina Colada Corp. purchased equipment on January 1, 2021 for $148,500. It is estimated that the equipment will have a $8,250 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 165,000 units over its 5-year life.

Answer the following independent questions.

Compute the amount of depreciation expense for the year ended December 31, 2021 using the straight-line method of depreciation.

Straight-line method

$enter the depreciation expense under the straight-line method for the year ended December 31, 2016 in dollars

per year

  

  

Question Part Score

--/3

If 16,000 units of product are produced in 2021 and 24,000 units are produced in 2022, what is the book value of the equipment at December 31, 2022? The company uses the units-of-activity depreciation method.

Book value at December 31, 2022

$enter the book value of the equipment at December 31, 2017 in dollars

  

  

Question Part Score

--/5

If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation—Equipment account at December 31, 2023?

Accumulated Depreciation—Equipment

enter the balance of the Accumulated Depreciation—Equipment account at December 31, 2018 in dollars

  

Answer 1

Based on the information available in the question, we can answer as follows:-

Requirement 1:-

Depreciation expense under Straight Line depreciation method = (Cost of the asset - Salvage value)/Estimated life of the asset

Depreciation expense = ($148,500 - $8,250)/ 5 years

Depreciation expense = $28,050

Requirement 2:-

Units of activity depreciation method = ($148,500 - $8,250)/165,000 units

Units of activity depreciation = $0.85 per unit

Depreciation expense for 2021 = $0.85 per unit * 16,000 units = $13,600

Depreciation expense for 2022 = $0.85 per unit * 24,000 units = $20,400

Book value as on December 31, 2022 = $148,500 - $13,600 - $20,400

Book value as on December 31, 2022 = $114,500

Requirement 3:-

Year	Depreciation Rate	Depreciable Amount	Depreciation expense (Depreciable amount * 40%)	Accumulated Depreciation	Book value
2021	40.00%	148,500	59,400	59,400	89,100
2022	40.00%	89,100	35,640	95,040	53,460
2023	40.00%	53,460	21,384	116,424	32,076
2024	40.00%	32,076	12,830	129,254	19,246
2025	57.13%	19,246	10,996	140,250	8,250

Depreciation rate = 100/5 years * 2 = 40%

Basd on the above calculation, the Accumulated Depreciation of the equipment as on December 31, 2023 is $116,424

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