Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $35,100. The equipment was expected to have a useful life of three years, or 3,780 operating hours, and a residual value of $1,080. The equipment was used for 700 hours during Year 1, 1,300 hours in Year 2, 1,100 hours in Year 3, and 680 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

a - STRAIGHT LINE METHOD

Year	Calculation	Amount ($)
Year 1	($35100 - $1080) / 3 years X (9/12 months)	8505
Year 2	($35100 - $1080) / 3 years X (12/12 months)	11340
Year 3	($35100 - $1080) / 3 years X (12/12 months)	11340
Year 4	($35100 - $1080) / 3 years X (3/12 months)	2835

Straight line depreciation = (Purchase price - Residual value) / 3 years

b - UNITS-OF-OUTPUT-METHOD

Year	Calculation	Amount ($)
Year 1	($35100 - $1080) / 3780 hours X 700 hours	6300
Year 2	($35100 - $1080) / 3780 hours X 1300 hours	11700
Year 3	($35100 - $1080) / 3780 hours X 1100 hours	9900
Year 4	($35100 - $1080) / 3780 hours X 680 hours	6120

Units-of-output-method = [(Purchase price - Residual value) / Total operating hours] X Hours operated in the year

c - DOUBLE-DECLINING-BALANCE-METHOD

Year	Calculation	Amount ($)
Year 1	$35100 X (33.3333% X 2) X (9/12 months)	17550
Year 2	$17550 X (33.3333% X 2) X (12/12 months)	11700
Year 3	$5850 X (33.3333% X 2) X (12/12 months)	3900
Year 4	$1950 X (33.3333% X 2) X (3/12 months)	325

Double-Declining-Balance-Method =
For Year 1 = Purchase Price X (Straight line depreciation rate X 2)
From Year 2 onwards = Ending Book value of previous year X (Straight line depreciation rate X 2)
(Straight line depreciation rate = 1/ 3 years = 33.3333%)

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