Question

1. Borges Distributors purchased waterproofing equipment on January 2^nd, 2011, for $450,000. The equipment was expected to have a useful life of four years, or 10,000 operating hours, and a residual value of $50,000. The equipment was used for 3,000 operating hours during 2011, 4,000 hours in 2012, 2,500 hours in 2013, and 500 hours in 2014.

Determine the amount of depreciation expense for the years ended December 31, 2011, 2012, 2013, and 2014, by (a) the straight-line method,

(b) the units- of-production method, and (c) the double-declining-balance method. Also, determine the total depreciation expense for the four years by each method. (12 points)

Year            S-L Method                U of P Method                   D-D Bal Method

           ____            _________                ____________                   _____________

           ____            _________                ____________                   _____________

           ____            _________                ____________                   _____________

           ____            _________                ____________                   _____________

           Totals          _________                ____________                   _____________

Answer 1

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1. Straight Line Method
Cost of Equipment		$                         450,000
Less: Residual Value		$                         -50,000
Depreciable Value		$                         400,000
Annual Depreciation		$                         100,000
$400,000/4 Years
2. Unit of production Method
Cost of Equipment		$                         450,000
Less: Residual Value		$                         -50,000
Depreciable Value	a	$                         400,000
Total Oeprating Hours	b	10,000.0
Depreciation per Hour	a/b	$                             40.00
3. Double Declining Method
Depreciation Rate (1/4*2)	50%
	Book Value	Depreciation 50%
Year 1	$          450,000	$                         225,000
Year 2	$          225,000	$                         112,500
Year 3	$          112,500	$                           56,250
Year 4	$            56,250	$                             6,250	Remaining Dep Value
		400,000-3 Year Dep
Table:
			$40* Hours
		Straight Line	Unit of Production	Double Declining
Year 1		$                         100,000	$                      120,000	$                    225,000
Year 2		$                         100,000	$                      160,000	$                    112,500
Year 3		$                         100,000	$                      100,000	$                      56,250
Year 4		$                         100,000	$                        20,000	$                        6,250
Total		$                         400,000	$                      400,000	$                    400,000