Crane Limited purchased equipment on February 1, 2024, at a cost of $151,280. As the CFO of the company, you are considering the merits of using the diminishing-balance or units-of-production method of depreciation instead of the straight-line method, which is currently being used for other equipment. The new equipment has an estimated residual value of $10,000 and an estimated useful life of either five years or 88,300 units. Demand for the products produced by the equipment is sporadic so the equipment will be used more in some years than in others. Assume the equipment produces the following number of units each year: 14,800 units in 2024; 26,000 units in 2025; 20,000 units in 2026; 15,000 units in 2027; and 12,000 units in 2028; and 500 in 2029. Crane has a December 31 year end. (a) Prepare separate depreciation schedules for the life of the equipment using: (Round depreciation per unit to 2 decimal places, e.g. 5.28 and final answers to O decimal places, e.g. 5,275.) (1) Straight-line method: Year 2024 $ 2025 2026 2027 2028 2029 Year (2) Double-diminishing-balance method: 2024 $ 2025 2026 2027 2028 2029 Year (3) Units-of-production method: 2024 2025 2026 2027 Depreciable Amount 2028 2029 Opening Carrying Amount Units-of-Production $ $ $ Depreciation Expense 71 Depreciation Expense T Depreciation Expense 17 $ $ $ Accumulated Depreciation Accumulated Depreciation Accumulated Depreciation $ $ Carrying Amount Carrying Amount Carrying Amount
Crane Limited purchased equipment on February 1, 2024, at a cost of $151,280. As the CFO of the company, you are considering the merits of using the diminishing-balance or units-of-production method of depreciation instead of the straight-line method, which is currently being used for other equipment. The new equipment has an estimated residual value of $10,000 and an estimated useful life of either five years or 88,300 units. Demand for the products produced by the equipment is sporadic so the equipment will be used more in some years than in others. Assume the equipment produces the following number of units each year: 14,800 units in 2024; 26,000 units in 2025; 20,000 units in 2026; 15,000 units in 2027; and 12,000 units in 2028; and 500 in 2029. Crane has a December 31 year end. (a) Prepare separate depreciation schedules for the life of the equipment using: (Round depreciation per unit to 2 decimal places, e.g. 5.28 and final answers to O decimal places, e.g. 5,275.) (1) Straight-line method: Year 2024 $ 2025 2026 2027 2028 2029 Year (2) Double-diminishing-balance method: 2024 $ 2025 2026 2027 2028 2029 Year (3) Units-of-production method: 2024 2025 2026 2027 Depreciable Amount 2028 2029 Opening Carrying Amount Units-of-Production $ $ $ Depreciation Expense 71 Depreciation Expense T Depreciation Expense 17 $ $ $ Accumulated Depreciation Accumulated Depreciation Accumulated Depreciation $ $ Carrying Amount Carrying Amount Carrying Amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Crane Limited purchased equipment on February 1, 2024, at a cost of $151,280. As the CFO of the company, you are considering the
merits of using the diminishing-balance or units-of-production method of depreciation instead of the straight-line method, which is
currently being used for other equipment. The new equipment has an estimated residual value of $10,000 and an estimated useful life
of either five years or 88,300 units. Demand for the products produced by the equipment is sporadic so the equipment will be used
more in some years than in others. Assume the equipment produces the following number of units each year: 14,800 units in 2024;
26,000 units in 2025; 20,000 units in 2026; 15,000 units in 2027; and 12,000 units in 2028; and 500 in 2029. Crane has a December
31 year end.
(a)
Prepare separate depreciation schedules for the life of the equipment using: (Round depreciation per unit to 2 decimal places, e.g.
5.28 and final answers to O decimal places, e.g. 5,275.)
(1) Straight-line method:
Year
2024 $
2025
2026
2027
2028
2029
Year
(2) Double-diminishing-balance method:
2024 $
2025
2026
2027
2028
2029
(3) Units-of-production method:
2024
Year Units-of-Production
2025
2026
Depreciable
Amount
2027
2028
Opening
Carrying
Amount
2029
$
$
$
Depreciation
Expense
Depreciation
Expense
Depreciation
Expense
TH
$
tA
tA
Accumulated
Depreciation
Accumulated
Depreciation
Accumulated
Depreciation
T
$
$
$
Carrying
Amount
Carrying
Amount
Carrying
Amount
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