Question

On March 31, 2018, Canseco Plumbing Fixtures purchased equipment for $44,000. Residual value at the end of an estimated four-year service life is expected to be $8,000. The company expects the machine to operate for 20,000 hours. a. Calculate depreciation expense for 2018 and 2019 using straight line method. b. Calculate depreciation expense for 2018 and 2019 using sum-of-the-years’-digits method. c. Calculate depreciation expense for 2018 and 2019 using double-declining balance method.

Answer 1

a. Calculate depreciation expense for 2018 and 2019 using straight line method.

Annual depreciation = (44000-8000)/4 = 9000 per year

2018 Dep = 9000*9/12 = 6750

2019 dep = 9000

b. Calculate depreciation expense for 2018 and 2019 using sum-of-the-years’-digits method.

Sum of year digit = 4+3+2+1 = 10

Depreciable base = 44000-8000 = 36000

2018 Dep = 36000*4/10*9/12 = $10800

2019 Dep = 36000*4/10*3/12+36000*3/10*9/12 = $11700

c. Calculate depreciation expense for 2018 and 2019 using double-declining balance method.

Double decline rate = 100/4*2 = 50%

2018 Dep = 44000*50%*9/12 = $16500

2019 Dep = (44000*50%*3/12+44000*50%*50%*9/12) = $13750