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	$

Check My Work

Answer 1

a. Straight-line method
Depreciation under straight-line method = (Cost of asset - Nat salvage value)/Useful life of asstet
Year	Amount
Year 1	22635
	((93240-2700)/3*9/12)
Year 2	30180
	((93240-2700)/3)
Year 3	30180
	((93240-2700)/3)
Year 4	7545
	((93240-2700)/3*3/12)
b. Units-of-output method
Depreciation under straight-line method = (Cost of asset - Nat salvage value)*current year operating hours/total operating hours
Year	Amount
Year 1	16,767
	((93240-2700)*1400/7560)
Year 2	31,138
	((93240-2700)*2600/7560)
Year 3	27,545
	((93240-2700)*2300/7560)
Year 4	15,090
	((93240-2700)*1260/7560)
c. Double-declining-balance method
Depreciation double-declining method = 2 * Rate of depreciation under straight-line method * Book value of the asset
Year	Beg. Value	Rate	Annual Depr. Exp. (2*Rate*BV)	Acc. Dep.	End BV
1	93,240	33.3%	46,620	46,620	46,620
		(30180/90540)	(for 9 months)
2	46,620	33.3%	31,080	77,700	15,540
3	15,540	33.3%	10,360	88,060	5,180
4	5,180	33.3%	2,480	90,540	2,700
			(for 3 months)