Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 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 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

Req a:
Cost of equipment			270000
Less: residual value'			9000
Depreciable cost			261000
Divide: Life			3
Annual depreciation			87000
Depreciation Schedule as per SLM
		Depreciation
YEar1		87000*9/12 = 65250
Year2		87000
Year3		87000
Year4		87000*3/12 = 21750
Req b: Units of output:
Cost of equipment			270000
Less: residual value'			9000
Depreciable cost			261000
Divide: Life			18000
Dep per hour			14.5
Depreciation as per Units of production
	Hours	Depreciation
Year1	7500	108750
Year2	5500	79750
Year3	4000	58000
Year4	1000	14500
Req c:
SLM rate: 100/*3= 33.33%
DDB rate: 33.33*2 = 66.67%
Depreciation as per DDB
	Depreciation		Book value at end
Year1	135000		135000
Year2	90000		45000
Year3	30000		15000
YEar4	6000		9000
	(15000-9000)