Question

Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 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-activity method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, 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

Req a.
STRAIGHT LINE MTHOD:
Cost of Asset:				270,000
Salvage value:				9,000
Life of asset:				3
Depreciable amount (cost-Salvage):				261,000
Annual Depreciation (Depreciable Amt/ Life)				87000
Depreciation in Year -1(for 9 months) = 87000*9/12 = 65250
Depreciation in Year-4 (3 months): 87000*3/12= 21750
Year		Depreciation
1		65,250
2		87,000
3		87,000
4		21,750
Rreq B:
Production life:		18000 hours
Depreciation per Hour: Depreciable Amount/ Life = 261,000 /18,000 = $ 14.50 per hour
Year		Production hours		Depreciation @14.50
1		7500		108750
2		5500		79750
3		4000		58000
4		1000		14500
Req C:
Rate under DDM (33.33*2) = 66.67%
Schedule of depreciation
Year	BV in Beg.	Dep. @66.67%		BV at end
1	270000	180000		90000
2	90000	60000		30000
3	30000	20000		10000
4	10000	1000	(B/fig)	9000