Question

Depreciation by Three Methods; Partial Years Perdue Company purchased equipment on April 1 for $49,950. The equipment was expected to have a useful life of three years, or 5,400 operating hours, and a residual value of $1,350. The equipment was used for 1,000 hours during Year 1, 1,900 hours in Year 2, 1,600 hours in Year 3, and 900 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 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

a)

Straight line Method
Cost of Equipment	$     49,950
Less: salvage value	$        1,350
Depreciable value	$     48,600
Life of Equipment	3 Years
Depreciation ($48,600 / 3)	$     16,200
Number of months used in 1st year	3 Months
Depreciation expense for 1st year ($16,200/12*9)	$     12,150
Depreciation expense for 2nd year	$     16,200
Depreciation expense for 3rd year	$     16,200
Depreciation expense for 4th year ($16,200/12*3)	$        4,050

b)

Depreciation under DDB Method
Year - a	Net Book value, beginning of year - b	Double declained depreciation - c = b/Life of assets*2	Net book value, End of the year - d = b-c
Year 1	$                          49,950	$49,950/3*2*9/12 = $24,975	$                         24,975
Year 2	$                          24,975	$                                                16,650	$                           8,325
Year 3	$                            8,325	$                                                  5,550	$                           2,775
Year 4	$                            2,775	$                                                  1,425	$                           1,350

c)

Depreciation under Activity based Method
Year - a	Depreciable value ($49,950-$1,350)	Number of hours used - c	Depreciation expense - d = b/5,400*c	Accumulated depreciation	Book value
Year 1	$                     48,600	1,000	$                               9,000	$            9,000	$   240,000
Year 2	$                     48,600	1,900	$                             17,100	$          26,100	$   222,900
Year 3	$                     48,600	1,600	$                             14,400	$          40,500	$   208,500
Year 4	$                     48,600	900	$                               8,100	$          48,600	$   200,400

You can reach me over comment box if you have any doubts. Please rate this answer