Question

Activity: Straight-line Depreciation

Equipment acquired at the beginning of the year at a cost of $125,000 has an estimate residual value of $5,000 and an estimated useful life of 10 years.

Determine the:

•Depreciable cost

•Annual straight-line depreciation

•Document the depreciation expense for the 10 years

	Formula	Dollar Values	Answer

Year	Depreciation Expense
1
2
3
4
5
6
7
8
9
10
Total

Activity: Units-of-Output

Equipment acquired at the beginning of the year at a cost of $24,000 has an estimated residual value of $2,000 and an estimated useful life of 10,000 hours and was operated 2,100 hours during the first year and 3,600 during the second year.

Determine the:

•Depreciation per unit

•Depreciation expense for years 1 and 2

	Formula	Dollar Values	Answer

Year	Depreciable Units		Depreciation per unit	Depreciation Expense
1		X
1		X
-------	-------------------------	----	Total

Answer 1

Determine the:

•Depreciable cost

•Annual straight-line depreciation

•Document the depreciation expense for the 10 years

	Formula	Dollar Values	Answer
	(Original cost-Salvage life)/Useful life	(125000-5000/10)	12000

Year	Depreciation Expense
1	12000
2	12000
3	12000
4	12000
5	12000
6	12000
7	12000
8	12000
9	12000
10	12000
Total	120000

Determine the:

•Depreciation per unit

•Depreciation expense for years 1 and 2

	Formula	Dollar Values	Answer
	(Original cost-salvage value/estimated Units)	(24000-2000/10000)	2.20 per unit

Year	Depreciable Units		Depreciation per unit	Depreciation Expense
1	2100	X	2.2	4620
1	3600	X	2.2	7920
-------	-------------------------	----	Total	12540