Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $37,530. The equipment was expected to have a useful life of three years, or 4,860 operating hours, and a residual value of $1,080. The equipment was used for 900 hours during Year 1, 1,700 hours in Year 2, 1,500 hours in Year 3, and 760 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-output method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then 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-output 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

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Initial Cost		$        37,530
Less: Salvage value		$         -1,080
Depreciable Value		$        36,450
Straight Line Method
Year	Working	Depreciation
Year 1 (9 Months)	$36,450/3 Years*9/12	$          9,113
Year 2	$900,000/3	$        12,150
Year 3	$900,000/3	$        12,150
Year 4 (3 Months)		$          3,038
Double Declining
Units of production
Per unit Depreciation	$37,530/4,860 Hours	$          7.722	per hour
Year 1	900*$7.722	$          6,950
Year 2	1700*$7.722	$        13,128
Year 3	1500*$7.722	$        11,583
Year 4	760*$7.722	$          5,869
SLM Rate	33.33%
Double Declining rate	66.66%
Year	Working	Depreciation	Book Value
Year 1	$37,530*66.66%*9/12	$        13,764	$      23,766
Year 2	Book Value*66.66%	$        15,843	$        7,924
Year 3	Book Value*66.66%	$          5,282	$        2,642
Year 4	$2,642-$1,080	$          1,562	$        1,080