Depreciation by three methods; partial years Perdue Company purchased equipment on April 1 for $73,440. The equipment was expected to have a useful life of 3 years, or 5,940 operating hours, and a residual value of $2,160. The equipment was used for 1,100 hours during Year 1, 2,100 hours in Year 2, 1,800 hours in Year 3, and 940 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) the units-of-activity method, and (c) the double-declining-balance method. Note: FOR DECLINING BALANCE ONLY, round the final multiplier to four decimal places. Then, round the answer for each year to the nearest whole dollar. a. Straight-line method Year Year 1 Year 2 Year 3 Year 4 b. Units-of-activity method Year Year 1 Year 2 Year 3 Year 4 Year Year 1 Year 2 $ Year 3 Year 4 Amount 17,820 23,760 23,760 5,940 c. Double-declining-balance method Amount 13,200 25,200 21,600 11,280 Amount 36,720 X 24,480 ✔ 8,160 X 2,720 X
Depreciation by three methods; partial years Perdue Company purchased equipment on April 1 for $73,440. The equipment was expected to have a useful life of 3 years, or 5,940 operating hours, and a residual value of $2,160. The equipment was used for 1,100 hours during Year 1, 2,100 hours in Year 2, 1,800 hours in Year 3, and 940 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) the units-of-activity method, and (c) the double-declining-balance method. Note: FOR DECLINING BALANCE ONLY, round the final multiplier to four decimal places. Then, round the answer for each year to the nearest whole dollar. a. Straight-line method Year Year 1 Year 2 Year 3 Year 4 b. Units-of-activity method Year Year 1 Year 2 Year 3 Year 4 Year Year 1 Year 2 $ Year 3 Year 4 Amount 17,820 23,760 23,760 5,940 c. Double-declining-balance method Amount 13,200 25,200 21,600 11,280 Amount 36,720 X 24,480 ✔ 8,160 X 2,720 X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:Depreciation by three methods; partial years
Perdue Company purchased equipment on April 1 for $73,440. The equipment was expected
to have a useful life of 3 years, or 5,940 operating hours, and a residual value of $2,160. The
equipment was used for 1,100 hours during Year 1, 2,100 hours in Year 2, 1,800 hours in Year
3, and 940 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) the units-of-activity method, and (c)
the double-declining-balance method.
Note: FOR DECLINING BALANCE ONLY, round the final multiplier to four decimal
places. Then, round the answer for each year to the nearest whole dollar.
a. Straight-line method
Year
Year 1
Year 2
Year 3
Year 4
b. Units-of-activity method
Year
Year 1
Year 2
Year 3
Year 4
Year
Year 1
Year 2
Year 3
Year 4
Amount
Feedback
17,820
23,760
$ 23,760
c. Double-declining-balance method
5,940
Amount
13,200
25,200
21,600
11,280
Amount
36,720 X
24,480 ✔
8,160 X
2,720 X
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