Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $93,420. The equipment was expected to have a useful life of three years, or 7,560 operating hours, and a residual value of $2,700. The equipment was used for 1,400 hours during Year 1, 2,600 hours in Year 2, 2,300 hours in Year 3, and 1,260 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 multiplier to four decimal places. Then 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	$ Can you break this problem down in the simplest form. Thanks

Answer 1

a	Using Straight line method:
	Annual Depreciation = (93420 - 2700)/3
			30240
	Year	Amount	Hint
	Year 1	22680	(30240 x 9/12)
	Year 2	30240
	Year 3	30240
	Year 4	7560	(30240 x 3/12)
b	Units-of-output method
	Depreciation per unit = ($93,420 - $2,700)/7,560 = $12.00 per hour
	Year	Amount	Hint
	Year 1	16800	=1400*12
	Year 2	31200	=2600*12
	Year 3	27600	=2300*12
	Year 4	15120	=1260*12
c	DDB rate = 100/Useful life x 2
	100/3 x 2 = 66.67%
	Book Value beginning	Rate	Depreciation		Book Value end
	93420	66.67%	46710	(93420 x 66.67% x 9/12)	46710
	46710	66.67%	31140		15570
	15570	66.67%	10380		5190
	5190	66.67%	2490		2700
			(5190-2700)
	Year	Amount
	Year 1	46710
	Year 2	31140
	Year 3	10380
	Year 4	2490