Depreciation by three methods; partial years Layton Company purchased tool sharpening equipment on October 1 for $44,550. The equipment was expected to have a useful life of 3 years or 5,400 operating hours, and a residual value of $1,350. The equipment was used for 1,000 hours during Year 1, 1,900 hours in Year 2, 1,600 hours in Year 3, and 900 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 multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar. a. Straight-line method Year Amount Year 1 $fill in the blank 1 Year 2 $fill in the blank 2 Year 3 $fill in the blank 3 Year 4 $fill in the blank 4 b. Units-of-activity method Year Amount Year 1 $fill in the blank 5 Year 2 $fill in the blank 6 Year 3 $fill in the blank 7 Year 4 $fill in the blank 8 c. Double-declining-balance method Year Amount Year 1 $fill in the blank 9 Year 2 $fill in the blank 10 Year 3 $fill in the blank 11 Year 4 $fill in the blank 12
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.
Layton Company purchased tool sharpening equipment on October 1 for $44,550. The equipment was expected to have a useful life of 3 years or 5,400 operating hours, and a residual value of $1,350. The equipment was used for 1,000 hours during Year 1, 1,900 hours in Year 2, 1,600 hours in Year 3, and 900 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 multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.
a. Straight-line method
| Year | Amount |
|---|---|
| Year 1 | $fill in the blank 1 |
| Year 2 | $fill in the blank 2 |
| Year 3 | $fill in the blank 3 |
| Year 4 | $fill in the blank 4 |
b. Units-of-activity method
| Year | Amount |
|---|---|
| Year 1 | $fill in the blank 5 |
| Year 2 | $fill in the blank 6 |
| Year 3 | $fill in the blank 7 |
| Year 4 | $fill in the blank 8 |
c. Double-declining-balance method
| Year | Amount |
|---|---|
| Year 1 | $fill in the blank 9 |
| Year 2 | $fill in the blank 10 |
| Year 3 | $fill in the blank 11 |
| Year 4 | $fill in the blank 12 |
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