Question
In: Accounting
Crane Company purchased equipment on March 27, 2018, at a cost of $284,000. Management is contemplating...
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Answer:
Cost of the Equipment =$284000
Residual value =$4,000
Deprecible value =$280,000
Useful life=4 years
A.) Straight line method
Annual Depreciation=Depreciation value / Life
Year 2018 =$280,000/4 =$70,000
Year 2019 =$280,000/4 =$70,000
Year 2020 =$280,000/4 =$70,000
Year 2021 =$280,000/4 =$70,000
Year 2022=$0
B.) Double declining balance method
Depreciation rate =2/ Useful life =2/4 =50%
| Year | Book value | Rate | Depreciation | Accumulated depreciation | Carrying value |
| 2018 | $284,000 | 50% | $142,000 | $142,000 | 142,000 |
| 2019 | $142,000 | 50% | $71,000 | $213,000 | $71,000 |
| 2020 | $71,000 | 50% | $35,500 | $248,500 | $35,500 |
| 2021 | $35,500 | 50% | $17750 | $266,250 | $17,750 |
| 2022 | $17750 | 50% | $8,875 | $275,125 | $8,875 |
C.) Units of production method
Annual Depreciation =Deprecible value/ Production units
=$280,000/80,000
=$3.5
| Year | Production(a) | Depreciation rate(b) | Depreciation Expense(a×b) | Accumulated depreciation |
| 2018 | 14,200 | $3.5 | $49,700 | $49,700 |
| 2019 | 20,600 | $3.5 | $72,100 | $121,800 |
| 2020 | 20,200 | $3.5 | $70,700 | $192,500 |
| 2021 | 20,000 | $3.5 | $70,000 | $262,500 |
| 2022 | 5,000 | $3.5 | $17,500 | $280,000 |
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