In: Accounting
On March 31, 2021, Canseco Plumbing Fixtures purchased equipment
for $38,000. Residual value at the end of an estimated four-year
service life is expected to be $2,000. The company expects the
equipment to operate for 10,000 hours. The equipment operated for
2,600 and 3,400 hours in 2021 and 2022, respectively.
Required:
a. Calculate depreciation expense for 2021 and
2022 using straight line method.
b. Calculate depreciation expense for 2021 and
2022 using double-declining balance method.
a)Depreciation expense for 2021 and 2022 using straight line method is as follows:
Depreciation expense p.a = (Cost - Salvage Value) / Useful Life
= ($38,000 - $2,000) / 4 Years
= $36,000 / 4 Years
= $9,000
1) Depreciation expense for 2021 for 9 months (March 31, 2021 to December 31,2021 )
= $9,000 * 9/12
= $6,750
Depreciation expense for 2021 for 9 months (March 31, 2021 to December 31,2021) is $6,750
2)Depreciation expense for 2022 for full year =
Depreciation under the straight line method will remain same for every year.
So Depreciation expense for 2022 for full year = $9,000
b)Depreciation expense for 2021 and 2022 using double-declining balance method is calculated as follows:
Depreciation expense under the Double-declining balance method = 1/4 *2*100
= 50%
1) Depreciation expense for 2021 for 9 months (March 31, 2021 to December 31,2021 )
= $38,000 * 50% *9/12
= $14,250
Depreciation expense for 2021 for 9 months (March 31, 2021 to December 31,2021 ) is $14,250
2)Depreciation expense for 2022 is
= ($38,000 - $14,250 ) * 50%
= $11,875
Depreciation expense for 2022 is $11,875