**Calculation of Depreciation for Equipment****Scenario:**You need to calculate the amount of depreciation to report during the year ended December 31 for equipment purchased at a cost of $84,000 on October 1. The equipment has an estimated residual value of $4,000 and an estimated useful life of five years or 20,000 hours.**Task:**Assume the equipment was used for 1,000 hours from October 1 to December 31. Use the following methods to calculate depreciation:1. **Straight-Line Method**2. **Double-Declining-Balance Method**3. **Units-of-Production Method***Note: Intermediate calculations should not be rounded.*---**Table for Depreciation Calculation:**| Method | Depreciation ||-------------------------------|--------------|| (a) Straight-Line | || (b) Double-Declining-Balance | || (c) Units-of-Production | |Fill in the table with the calculated depreciation amounts for each method.

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Description: **Calculation of Depreciation for Equipment****Scenario:**You need to calculate the amount of depreciation to report during the year ended December 31 for equipment purchased at a cost of $84,000 on October 1. The equipment has an estimated residual

Lets understand the basics.In straight line basis, depreciation gets calculated in equal installment over a period of time.Formula = (Cost of asset - Salvage value)/Useful lifeIn double declining balance depreciation method, depreciation is calculated at double rate of straight line basis.Formula for depreciation rate = (1/Useful life)*2*100In units of production method, depreciation is calculated based on units produced or hours used against total production possible or hours can be worked on asset.Formula = (Cost of asset - Salvage value)*Hours used/Total hours of assetSo here in this case,(A) Straight line basis :- Depreciation for full year = ($84,000 - $4,000)/5 years = $16,000Therefore,Depreciation for period October 1 to December 31 = $16,000 * (3/12) = $4,000(B) Double declining balance method:-Depreciation rate = (1/5)*2*100 = 40%Therefore,Depreciation for period October 1 to December 31 = $84,000 * 40% * (3/12) = $8,400(C)Unit of production method :- ($84,000-$4,000)*1,000 hours/20,000 hours :- $4,000Therefore,(A) Straight line basis = $4,000(B) Double declining balance method = $8,400(C) Unit of production method = $4,000

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Calculate the amount of depreciation to report during the year ended December 31 for equipment that was purchased at a cost of $84,000 on October 1. The equipment has an estimated residual value of $4,000 and an estimated useful life of five years or 20,000 nours. Required: Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses (a) straight-line, (b) double- declining-balance, or (c) units-of-production depreciation. (Do not round intermediate calculations.) (a) Straight-Line (b) Double-Declining-Balance (c) Units-of-Production Depreciation

Calculate the amount of depreciation to report during the year ended December 31 for equipment that was purchased at a cost of $84,000 on October 1. The equipment has an estimated residual value of $4,000 and an estimated useful life of five years or 20,000 nours. Required: Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses (a) straight-line, (b) double- declining-balance, or (c) units-of-production depreciation. (Do not round intermediate calculations.) (a) Straight-Line (b) Double-Declining-Balance (c) Units-of-Production Depreciation

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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