Question

Depreciation by Three Methods; Partial Years Perdue Company purchased equipment on April 1 for $80,190. The equipment was expected to have a useful life of three years, or 6,480 operating hours, and a residual value of $2,430. The equipment was used for 1,200 hours during Year 1, 2,300 hours in Year 2, 1,900 hours in Year 3, and 1,080 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

Answer 1

1	Straight line depreciation = (Cost of asset - salvage value )/ Life of the asset
	Depreciation expense = (80190-2430) /3	25920	Accumulated depreciation
		Depreciation expense		Book value
Year 0			0	80190
Year 1	25920*12/12	25,920	25,920	54,270
Year 2	25920*12/12	25,920	51,840	28,350
Year 3	25920*12/12	25,920	77,760	2,430
2	Double declining method
	Depreciation rate = [(cost of asset / life of asset ) / cost of asset ] *2
	Depreciation rate = 1/3*200%
	Depreciation rate =	66.67%
	Depreciation = written down value * depreciation rate		Accumulated depreciation
		Depreciation expense		Book value
Year 0				80190
Year 1	Depreciation = 80190*66.67%	53460	53,460	26,730
Year 2	Depreciation = 26730*66.67%	17,820	71,280	8,910
Year 3	Depreciation = 8910*66.67%	5940	77,220	2,970
3	Units of production method
	Depreciation per machine hour = (Cost of asset - salvage value )/ total machine hour
	Depreciation per machine hour = (80190-2430 )/6200
	Depreciation per item	12.54	Accumulated depreciation
		Depreciation expense		Book value
Year 0				80190
Year 1	12.54*1200	15048	15,048	65,142
Year 2	12.54*2300	28842	43,890	36,300
Year 3	12.54*1900	23826	67,716	12,474
Year 4	12.54*1080	12474	80,190	0