Question

Twilight Manufacturing's property, plant and equipment records reveal the following information:

Equipment

Cost

Residual Value

Purchase Date

Depreciation Method

Estimated Useful Life

Units Produced in 2014

(1)

50,000

12,000

Dec1, 2013

Straight Line

5 years

2,000

(2)

60,000

8,000

Oct 18, 2014

Units of Production

50,000 units

5,000

(3)

120,000

none

June 12, 2014

Double Declining Balance

10 years

6,000

(4)

90,000

10,000

May 3, 2014

Straight Line

8 years

8,000

Calculate the depreciation expense for each equipment item for the year ended December 31, 2014, using the nearest whole month method.

Answer 1

1) Deprecaition expense for 2014= (Original cost-Residual value)/Estimated useful life

= ($50000-12000)/5= $7600

2) Depreciation expense per unit= (Original cost-Residual value)/Estimated units produced

= ($60000-8000)/50000= $1.04

Depreciation expense for 2014= Depreciation expense per unit*Units produced in 2014

= $1.04*5000= $5200

3) Depreciation rate= 100/10*2= 20%

Depreciation expense for 2014= $120000*20%*7/12

= $14000

June 12 to Dec 31= 7 months

4) Depreciation expense for 2014= (Original cost-Residual value)/Estimated useful life

= ($90000-10000)/8*8/12

= $6667

May 3 to Dec 31= 8 months

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