Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-activity method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar.

a. Straight-line method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

b. Units-of-activity method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

c. Double-declining-balance Method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

Answer 1

a.	Straight Line method:-
		Original Cost	-	Residual Value	/	Life (years)	X	Fraction of year	=	Depreciation expense
	Year 1	$   2,70,000	-	$       9,000	/	3	X	9/12	=	$         65,250
	Year 2	$   2,70,000	-	$       9,000	/	3	X		=	$         87,000
	Year 3	$   2,70,000	-	$       9,000	/	3	X		=	$         87,000
	Year 4	$   2,70,000	-	$       9,000	/	3	X	3/12	=	$         21,750
b.	Units of activity method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value in units
		=	($270000 - $9000) / 18000
		=	$      14.50
	Year	Units				Depreciation expense
	Year 1	7500	X	$       14.50	=	$    1,08,750
	Year 2	5500	X	$       14.50	=	$        79,750
	Year 3	4000	X	$       14.50	=	$        58,000
	Year 4	1000	X	$       14.50	=	$        14,500
		18000
b.	Double - declining balance method:-
	Double declining rate	=	(100% / 3 years) X 2
		=	67%
		Original Cost	-	Accumulated Depreciation	X	Rate	X	Fraction of year	=	Depreciation expense
	Year 1	$   2,70,000	-		X	67%	X	9/12	=	$     1,35,000
	Year 2	$   2,70,000	-	$ 1,35,000	X	67%	X		=	$         90,000
	Year 3	$   2,70,000	-	$ 2,25,000	X	67%	X		=	$         30,000
	Year 4	$   2,70,000	-	$ 2,55,000	X		-	$    9,000	=	$           6,000
	If it is helpful, please rate the answer and if any doubt arises let me know