Chapter 10, Problem E10.20E

Computing depreciation−three methods

Learning Objective 2
1. Double-declining-balance, 12/31/19, Exp. $8,250

Crispy Fried Chicken bought equipment on January 2, 2018, for $33,000. The equipment was expected to remain in service for four years and to operate for 6,750 hours. At the end of the equipment’s useful life, Crispy’s estimates that its residual value will be $6,000. The equipment operated for 675 hours the first year, 2,025 hours the second year, 2,700 hours the third year, and 1,350 hours the fourth year.

Requirements

1. Prepare a schedule of depreciation expense, accumulated depreciation, ad book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared.
2. Which method tracks the wear and tear on the equipment most closely?