Question

In: Accounting

On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping...

On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping and installation) of $82,000. The equipment is expected to have a useful life of four years or produce a total of 122,000 units. At the end of its life, the equipment is expected to have a residual value of $4,900. The equipment is expected to produce 25,620 units in 2014; 32,940 units in 2015; 34,160 units in 2016; and 29,280 units in 2017. Courier Inc.'s fiscal year ends on December 31.

In the table below, fill in the missing depreciation expense and accumulated depreciation amounts using the straight-line, double-declining-balance, and units-of-production methods. Do not round your intermediate calculation. When required, round your answers to the nearest dollar.

Cost
$82,000

Depreciation Expense

Accumulated Depreciation


Year

Straight-line
Method
Double-
Declining-
Balance Method
Unit-of-
Production
Method

Straight-line
Method
Double-
Declining-
Balance Method
Unit-of-
Production
Method
2014 $19,275 $41,000 $16,191 $19,275 $41,000 $16,191
2015 $19,275 $ ? $20,817 $ ? $61,500 $37,008
2016 $19,275 $10,250 $ ? $57,825 $ ? $58,596
2017 $19,275 $5,350 $18,504 $77,100 $77,100 $77,100

Solutions

Expert Solution

1. Computation of Depreciation for Year 2015 under Double Declining Method:

Depreciation for Year 2015 under Double Declining Method = Accumulated Depreciation at the end of Year 2015 - Accumulated Depreciation at the end of Year 2014

Therefore,Depreciation for Year 2015 under Double Declining Method = $61,500 - $41,000 = $20,500

2. Computation of Depreciation for Year 2016 under Unit-of-Production Method:

Units-of-production Depreciation rate = (Cost of Asset - Residual Value) / Total Units of production
Units-of-production Depreciation rate= ($82,000-$4,900)/122,000 units = $0.6320 per unit

Depreciation Expense = Units of production Depreciation x Units Produced

Therefore, depreciation expense for the Year 2016 = 34,160 units * $0.6320 = $21,588

3. Computation of Accumulated Depreciation for Year 2015 under straight-line Method:

Accumulated Depreciation at the end of Year 2015 = Depreciation for Year 2014 as per straight-line Method + Depreciation for Year 2014 as per straight-line Method

Accumulated Depreciation at the end of Year 2015 = $19,275 + $19,275 = $38,550


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