Question

At the beginning of 2017, your company buys a $32,000 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 6,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 46,000 units in 2017, 55,000 units in 2018, 55,000 units in 2019, and 44,000 units in 2020.

Required:

A.Determine the depreciable cost.

B.Calculate the depreciation expense per year under the straight-line method.

C.Use the straight-line method to prepare a depreciation schedule.

D.Calculate the depreciation rate per unit under the units-of-production method.

E.Use the units-of-production method to prepare a depreciation schedule.

Answer 1

A
Depreciable cost = 32000 - 6000 = 26000

B
Depreciation expense = 26000/4 = 6500 per year

C

Year	Cost	Acc dep beginning	Depreciation expense	Acc dep ending	Net book value
2017	32,000	-	6,500	6,500	25,500
2018	32,000	6,500	6,500	13,000	19,000
2019	32,000	13,000	6,500	19,500	12,500
2020	32,000	19,500	6,500	26,000	6,000

D
Depreciation rate = 26000/200000 = 0.13 per unit

E

Year	Cost	Acc dep beginning	Depreciation expense	Acc dep ending	Net book value
2017	32,000	-	5,980	5,980	26,020
2018	32,000	5,980	7,150	13,130	18,870
2019	32,000	13,130	7,150	20,280	11,720
2020	32,000	20,280	5,720	26,000	6,000

please rate.