Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $38,880. The equipment was expected to have a useful life of three years, or 5,400 operating hours, and a residual value of $1,080. The equipment was used for 1,000 hours during Year 1, 1,900 hours in Year 2, 1,600 hours in Year 3, and 900 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 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-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) Depreciation under stright line method

Cost of Equipment	$ 38,880
Less: salvage value	$    1,080
Depreciable value	$ 37,800
Depreciation ($37,800 / 3)	$ 12,600
Depreciation expense for 1st year ($12,600/12*9)	$    9,450
Depreciation expense for 2nd year	$ 12,600
Depreciation expense for 3rd year	$ 12,600
Depreciation expense for 4th year ($12,600/12*3)	$    3,150

b) Depreciation under units of activity method

Year - a	Net Book value, beginning of year - b ($38,880-$1,080)	Number of hours used - c	Depreciation expense - d = b/5,400*c
Year 1	$                                       37,800	1,000	$                               7,000
Year 2	$                                       37,800	1,900	$                             13,300
Year 3	$                                       37,800	$                                      1,600	$                             11,200
Year 4	$                                       37,800	$                                          900	$                               6,300

c. Depreciation under double declaining balance method

Year - a	Net Book value, beginning of year - b	Double declained depreciation - c = b/Life of assets*2	Net book value, End of the year - d = b-c
Year 1	$                                      38,880	$38,880/3*2*9/12 = $19,440	$                         19,440
Year 2	$                                      19,440	$                                                12,960	$                           6,480
Year 3	$                                         6,480	$                                                  4,320	$                           2,160
Year 4	$                                         2,160	$                                                  1,080	$                           1,080

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