Sheridan Company purchased equipment on March 31, 2021, at a cost of $280,000. Management is considering the merits of using the diminishing-balance or units-of-production method of depreciation instead of the straight-line method, which it currently uses for other equipment. The new equipment has an estimated residual value of $8,000 and an estimated useful life of either four years or 80,000 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: 14,400 units in 2021; 20,600 units in 2022; 20,000 units in 2023; 20,000 units in 2024; and 5,000 units in 2025. Sheridan has a December 31 year end.
Sheridan Company purchased equipment on March 31, 2021, at a cost of $280,000. Management is considering the merits of using the diminishing-balance or units-of-production method of depreciation instead of the straight-line method, which it currently uses for other equipment. The new equipment has an estimated residual value of $8,000 and an estimated useful life of either four years or 80,000 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: 14,400 units in 2021; 20,600 units in 2022; 20,000 units in 2023; 20,000 units in 2024; and 5,000 units in 2025. Sheridan has a December 31 year end.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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Transcribed Image Text:(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.)
Straight-line method:
Year
2021 $
2022
2023
2024
2025
Double-diminishing-balance method:
Year
2021 $
2022
2023
2024
2025
4
Year
Units-of-production method:
2021
2022
2023
Depreciable
Amount
2024
2025
Opening
Carrying
Amount
Units-of-Production
eTextbook and Media
$
$
$
Depreciation
Expense
Depreciation
Expense
Depreciation
Expense
$
$
Accumulated
Depreciation
Accumulated
Depreciation
Accumulated
Depreciation
[
$
$
$
Carrying
Amount
Carrying
Amount
Carrying
Amount
Transcribed Image Text:Sheridan Company purchased equipment on March 31, 2021, at a cost of $280,000. Management is considering the merits of using
the diminishing-balance or units-of-production method of depreciation instead of the straight-line method, which it currently uses
for other equipment. The new equipment has an estimated residual value of $8,000 and an estimated useful life of either four years
or 80,000 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: 14,400 units in 2021; 20,600 units in
2022; 20,000 units in 2023; 20,000 units in 2024; and 5,000 units in 2025. Sheridan has a December 31 year end.
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