In: Accounting
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:
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