Question

Problem I

      Barrett Corporation bought equipment on January 1, 2019 for $64,000. At the time, its estimated life was 5 years/200,000 hours and its estimated scrap value was $4,000.

   

      In 2019 the equipment was employed for 35,000 hours.

   Required:

     Calculate 2019 depreciation expense under:

A) Straight-line depreciation

B) Units of production method

C) Double Declining Balance

Problem II

     On May 1, 2020 Harris Corporation purchased three machines for a total of $160,000. If he purchased them separately Machine 1 would have cost $50,000; Machine 2 would have cost $80,000; and Machine 3 would have cost $70,000.

     Required:

     Prepare the journal entry Harris should make on May 1, 2020.

Answer 1

1.

Depreciation expense = (Cost - Salvage value)/Useful life = (64,000-4,000)/5 = 12,000

Units of production - Depreciation expense per hour = (Cost - Salvage value) /Useful life in hours = (64,000-4,000)/200,000 = 0.30 Depreciation expense = 0.30 * 35,000 = 10,500

Double declining rate = 200/Useful life = 200/5 = 40% Depreciation expense = 64,000*40% = 25,600

.

.

Total = 50,000+80,000+70,000 = 200,000

Account	Debit	Credit
Machine 1 (50,000/200,000)*160,000	40,000
Machine 2 (80,000/200,000)*160,000	64,000
Machine 3 (70,000/200,000)*160,000	56,000
Cash		160,000