Question

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $40,770. The equipment was expected to have a useful life of three years, or 3,780 operating hours, and a residual value of $1,080. The equipment was used for 700 hours during Year 1, 1,300 hours in Year 2, 1,100 hours in Year 3, and 680 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) the units-of-activity 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-activity 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	$

Answer 1

Answer a:

Year	Amount
Year 1	$ 9,923
Year 2	$      13,230
Year 3	$      13,230
Year 4	$ 3,308

Calculation:

Year	Amount
Year 1 (for 9 months only)	=(40770-1080)/3*9/12
Year 2	=(40770-1080)/3
Year 3	=(40770-1080)/3
Year 4 (for 3 months only)	=(40770-1080)/3*3/12

Answer b:

Year	Amount
Year 1	$        7,350
Year 2	$      13,650
Year 3	$      11,550
Year 4	$        7,140

Calculation:

Year	Amount
Year 1	=(40770-1080)/3780*700
Year 2	=(40770-1080)/3780*1300
Year 3	=(40770-1080)/3780*1100
Year 4	=(40770-1080)/3780*680

Answer c:

Depreciation rate = 100 / 3 * 2

= 66.6667%

Year	Amount
Year 1	$        20,385
Year 2	$        13,590
Year 3	$          4,530
Year 4	$             377

Calculation:

Year	Amount
Year 1	=40770*66.6667%*9/12
Year 2	=(40770-20385)*66.6667%
Year 3	=(40770-20385-13590)*66.6667%
Year 4	=(40770-20385-13590-4530)*66.6667%*3/12

In case of any doubt, please comment.