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-dedining- balance methad. 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 14,850 Year 2 19,800 Year 3 19,800 Year 4 4,950 b. Units-of-activity method Year Amount Year 1 11,000 Year 2 $ 20,900 Year 3 $ 17,600 Year 4 9,900 c. Double-declining-balance method Year Amount Year 1 Year 2 20,430 Year 3 Year 4
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.
Perdue Company purchased equipment on April 1 for $61,290. The equipment was expected to have a useful life of three years, or 5,400 operating hours, and a residual value of $1,890. 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.
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