Question
In: Accounting
On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $44,000. Residual value at the end...
On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $44,000. Residual value at the end of an estimated four-year service life is expected to be $8,000. The company expects the equipment to operate for 20,000 hours. The equipment operated for 2,900 and 3,700 hours in 2021 and 2022, respectively.
Required:
a. Calculate depreciation expense for 2021 and
2022 using straight line method.
b. Calculate depreciation expense for 2021 and
2022 using double-declining balance method.
c. Calculate depreciation expense for 2021 and
2022 using units-of-production using hours operated.
Solutions
Expert Solution
| As per SLM Method | |||||
| Year | Original Cost | Depreciable Cost | Depreciation Expense | Accumulated Depreciation | Ending Book Value |
| 2021 | 44,000 | 36,000 | 9,000 | 9,000 | 35,000 |
| 2022 | 44,000 | 27,000 | 9,000 | 18,000 | 26,000 |
| SLM=( Original Cost- Salvage Value )/ No. of Year | |||||
| = (44000-8000)/4=9000 | |||||
| Unit of Production Method | ||||||
| Year | Original Cost | Depreciable Cost | Depreciation Expense | Accumulated Depreciation | Ending Book Value | Working :-( Cal of Depreciation) |
| 2021 | 44,000 | 36,000.00 | 5220 | 5,220.00 | 38,780.00 | (36000/20000)*2900 |
| 2022 | 44,000 | 30,780.00 | 6660 | 11,880.00 | 32,120.00 | (36000/20000)*3700 |
| As per double declinning method | ||||||
| Year | Original Cost | Depreciable Cost | Depreciation Expense | Accumulated Depreciation | Ending Book Value | |
| 2021 | 44,000.00 | 44,000.00 | 22,000.00 | 22,000.00 | 22,000.00 | (Depreciable Cost X 50%) |
| 2022 | 44,000.00 | 22,000.00 | 11,000.00 | 33,000.00 | 11,000.00 | |
| Rate of Depreciation :=1/4*2= 50% | ||||||
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