Question

At the beginning of 2015, your company buys a $33,200 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 4,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 45,000 units in 2015, 53,000 units in 2016, 46,000 units in 2017, and 56,000 units in 2018. Required: a. Determine the depreciable cost. b. Calculate the depreciation expense per year under the straight-line method. c. Use the straight-line method to prepare a depreciation schedule. d. Calculate the depreciation rate per unit under the units-of-production method. (Round your answer to 2 decimal places.) e. Use the units-of-production method to prepare a depreciation schedule. (Do not round your Depreciation rate per unit.) Explanation: a. Depreciable cost = Cost – Residual value = $33,200 – $4,000 = $29,200 b. Depreciation expense per year = (Cost – Residual value) × (1 ÷ Useful life) = ($33,200 – $4,000) × 1/4 = $7,300 d. Depreciation rate = (Cost – Residual value) ÷ Estimated total production = ($33,200 – $4,000) /200,000 units = $0.146 or 14.6¢ per unit e. Year Depreciation Expense Acquisition cost 2015 $ 6,570 (14.6¢ × 45,000) 2016 $ 7,738 (14.6¢ × 53,000) 2017 $ 6,716 (14.6¢ × 46,000) 2018 $ 8,176 (14.6¢ × 56,000)

Answer 1

Req a:
Depreciable cost:
Cost of equipment			33200
Less: Salvage value			4000
Depreciable cost:			29200
Req b:
Depreciable cost			29200
Divide: Life of equipment			4
Annual depreciation			7300
Req c:
Year	Annual dep	Accumulated		BV at the end
		Depreciation
0				33200
1	7300	7300		25900
2	7300	14600		18600
3	7300	21900		11300
4	7300	29200		4000
Req d:
Depreciable cost			29200
Divide: Total production			200000
Depreciation rate per unit			0.146
Req e;
Year	Production	Rate	Annual dep
1	45000	0.146	6570
2	53000	0.146	7738
3	46000	0.146	6716
4	56000	0.146	8176