Question

Depreciation by Three Methods; Partial Years

Layton Company purchased tool sharpening equipment on October 1 for $108,000. The equipment was expected to have a useful life of three years, or 12,000 operating hours, and a residual value of $7,200. The equipment was used for 1,350 hours during Year 1, 4,200 hours in Year 2, 3,650 hours in Year 3, and 2,800 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-output method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar.

a. Straight-line method

Year Amount
Year 1 $
Year 2 $
Year 3 $
Year 4 $

b. Units-of-output method

Year Amount
Year 1 $
Year 2 $
Year 3 $
Year 4 $

c. Double-declining-balance method

Year Amount
Year 1 $
Year 2 $
Year 3 $
Year 4 $

Answer 1

Answer for a)

Depreciation under straight line method:

Particulars	amount($)
Year 1	8600 [[($108000-$7200)/2]×3/12]
Year 2	33600 [[($108000-$7200)/2]]
Year 3	33600 [[($108000-$7200)/2]
Year 4	25200 [[($108000-$7200)/2]×9/12]

Answer for b)

Units output method

Particulars	amount($)
Year 1	11340 [(108000-7200)×1350 hours/12000]
Year 2	35280 [($108000-7200)×4200/12000hours]
Year 3	30660 [($108000-$7200)×3650 hours/12000hours]
Year 4	23520 [($108000-$7200)×2800/12000 hours]

Answer for c)

Double declining method:

Rate of depreciation:1/3years×200%=66.67%

Particulars	amount($)
Year 1	18001 [($108000×66.67%)×3/12]
Year 2	60002 [($108000-18001]×66.67%]
year 3	19999 [($89999-60002)×66.67%]
Year 4	2798 [($108000-7200)-$(18001-60002-19999)]