Question

On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping and installation) of $83,000. The equipment is expected to have a useful life of four years or produce a total of 123,000 units. At the end of its life, the equipment is expected to have a residual value of $4,300. The equipment is expected to produce 22,140 units in 2014; 31,980 units in 2015; 31,980 units in 2016; and 36,900 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 $83,000	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	$. ????	$41,500	$14,166	$19,675	$41,500	$14,166
2015	$19,675	$ ????	$20,462	$ ????	$62,250	$34,628
2016	$19,675	$10,375	$ ????	$59,025	$ ????	$55,090
2017	$19,675	$6,075	$23,610	$78,700	$78,700	$. ????

Answer 1

,Solution :

	Depreciation Expenses			Accumulated Depreciation
	Straight-line Method	Double- Declining- Balance Method	Unit-of- Production Method	Straight-line Method	Double- Declining- Balance Method	Unit-of- Production Method
2014	$ 19,675	$ 41,500	$ 14,166	$ 19,675	$ 41,500	$ 14,166
2015	$ 19,675	$ 20,750	$ 20,462	$ 39,350	$ 62,250	$ 34,625
2016	$ 19,675	$ 10,375	$ 20,462	$ 59,025	$ 72,625	$ 55,090
2017	$ 19,675	$ 6,075	$ 23,610	$ 78,700	$ 78,700	$ 78,700

Working :

(1) Depreciation as per Straight Line Method = (Original Cost - Salvage Value) / Useful Life

= ($ 83,000 - $ 4,300) / 4

= $ 19,675

(2) Rate of Depreciation as per Double Decline Method = (100% / Useful life) * 2   

= (100% / 4) * 2   

= 50%

	2014	2015
(a) Opening Balance	$ 83,000	$ 41,500
(b) Depreciation (a * 50%)	$ 41,500	$ 20,750
(c) Carrying Value (a - b)	$ 41,500	$ 20,750

(3) Depreciation expenses per Units of Production Method= (Original Cost - Slvage Value) / Estimated Production * Units Produced

Depreciation for 2016 =  ($ 83,000 - $ 4,300) / (22140 + 31,980 + 31,980 + 36,900 ) * 31,980

= $ 78,700 / 123,000 * 31,980

= $ 20,462.

	Depreciation Expenses			Accumulated Depreciation
	Straight-line Method	Double- Declining- Balance Method	Unit-of- Production Method	Straight-line Method	Double- Declining- Balance Method	Unit-of- Production Method
2014	$ 19,675	$ 41,500	$ 14,166	$ 19,675	$ 41,500	$ 14,166
2015	$ 19,675	$ 20,750	$ 20,462	$ 19,675 * 2 = $ 39,350	$ 62,250	$ 34,625
2016	$ 19,675	$ 10,375	$ 20,462	$ 59,025	$ 41,500 + $ 20,750 + $ 10,375 = $ 72,625	$ 55,090
2017	$ 19,675	$ 6,075	$ 23,610	$ 78,700	$ 78,700	$ 14,166 + $ 20,462 $ 20,462 + $ 23,610 = $ 78,700

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