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explain part 3 preparing the schedule using activity based depreciation and show all the steps

explain part 3 preparing the schedule using activity based depreciation and show all the steps

FINANCIAL ACCOUNTING
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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explain part 3 preparing the schedule using activity based depreciation and show all the steps
### Depreciation Calculation for Cheetah Copy's New Machine Cheetah Copy purchased a new copy machine. The new machine cost $140,000, including installation. The company estimates the equipment will have a residual value of $35,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. #### 1. Annual Depreciation Expense Using Straight-Line Method 1. **Straight-line depreciation** calculates the machine's annual depreciation by equally spreading the cost over its useful life. #### 2. Depreciation Schedule Using Double Declining Method Prepare the depreciation schedule using the double declining depreciation method. | Year | Beginning Book Value | Depreciation Rate | Depreciation Expense | Accumulated Depreciation | Ending Book Value | |------|----------------------|-------------------|----------------------|--------------------------|-------------------| | 1 | | | | | | | 2 | | | | | | | 3 | | | | | | | 4 | | | | | | - **Double declining balance** is an accelerated depreciation method. It applies twice the straight-line depreciation rate to the declining book value annually. #### 3. Depreciation Schedule Using Activity-Based Method Prepare the depreciation schedule using the activity-based depreciation method. | Year | Hours Used | Depreciation Rate | Depreciation Expense | Accumulated Depreciation | Ending Book Value | |------|------------|-------------------|----------------------|--------------------------|-------------------| | 1 | 3,000 | | | | | | 2 | 2,000 | | | | | | 3 | 2,000 | | | | | | 4 | 2,000 | | | | | - **Activity-based depreciation** calculates depreciation based on actual usage, useful in scenarios where wear and tear vary year by year. *This educational material is prepared by Dr. Baaske. Do not share.*
Transcribed Image Text:### Depreciation Calculation for Cheetah Copy's New Machine Cheetah Copy purchased a new copy machine. The new machine cost $140,000, including installation. The company estimates the equipment will have a residual value of $35,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. #### 1. Annual Depreciation Expense Using Straight-Line Method 1. **Straight-line depreciation** calculates the machine's annual depreciation by equally spreading the cost over its useful life. #### 2. Depreciation Schedule Using Double Declining Method Prepare the depreciation schedule using the double declining depreciation method. | Year | Beginning Book Value | Depreciation Rate | Depreciation Expense | Accumulated Depreciation | Ending Book Value | |------|----------------------|-------------------|----------------------|--------------------------|-------------------| | 1 | | | | | | | 2 | | | | | | | 3 | | | | | | | 4 | | | | | | - **Double declining balance** is an accelerated depreciation method. It applies twice the straight-line depreciation rate to the declining book value annually. #### 3. Depreciation Schedule Using Activity-Based Method Prepare the depreciation schedule using the activity-based depreciation method. | Year | Hours Used | Depreciation Rate | Depreciation Expense | Accumulated Depreciation | Ending Book Value | |------|------------|-------------------|----------------------|--------------------------|-------------------| | 1 | 3,000 | | | | | | 2 | 2,000 | | | | | | 3 | 2,000 | | | | | | 4 | 2,000 | | | | | - **Activity-based depreciation** calculates depreciation based on actual usage, useful in scenarios where wear and tear vary year by year. *This educational material is prepared by Dr. Baaske. Do not share.*
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