Question

Helix Company purchased tool sharpening equipment in April 1, 2010 for $72,000. The equipment was expected to have a useful life of four years, or 9,000 operating hours, and a residual value of $2,700. The equipment was used for 2,400 hours during 2010, 4,000 hours in 2011, 2,000 hours in 2012, and 600 hours in 2013.

Instructions: Determine the amount of depreciation expense for the years ended December 31, 2010, 2011, 2012, and 2013 by each of the following methods:

1. Straight-line

2. The units of activity method

3. Double Declining balance method

Answer 1

Answer:

a)

particulars	Amount
2010	12994
2011	17325
2012	17325
2013	4331

Depreciation expense 2010= (72000-2700)/4 x 9/12
=17325 x 9/12
=12994
Therefore the amount of depreciation expense using the straight line method is $12994.
Depreciation for the year ended December 31 2011, 2012 is $17325
Depreciation expense 2013= (72000-2700)/4 x 3/12
=17325 x 3/12
=4331

b)

year	hours used	depreciation rate	depreciation
2010	2400	7.7	18480
2011	4000	7.7	30800
2012	2000	7.7	15400
2013	600	7.7	46

Depreciation rate per hour = (72000-2700)/9000)=7.7

c)

particulars	amount
2010	27000
2011	22500
2012	11250
2013	11250

Depreciation for the year 2010=72000 x 2/4 x 9/12 =27000
Depreciation for the year 2011=(72000-27000) x 2/4 =22500
Depreciation for the year 2012=(72000-27000-22500) x 2/4  =11250
Book value on 2012=(72000-27000-22500-11250)=11250
Depreciation for the year 2013=(11250-2700) =8550