Question

t the beginning of 2017, your company buys a $30,000 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 6,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 42,000 units in 2017, 48,000 units in 2018, 49,000 units in 2019, and 61,000 units in 2020.


Required:

1. Determine the depreciable cost.
2. Calculate the depreciation expense per year under the straight-line method.
3. Use the straight-line method to prepare a depreciation schedule.
4. Calculate the depreciation rate per unit under the units-of-production method.
5. Use the units-of-production method to prepare a depreciation schedule.

Answer 1

a) Depreciable cost = Original cost-Salvage value = 30000-6000 = 24000

b) Depreciation expense per year = 24000/4 = 6000

c) Schedule : Straight line method

Year	Depreciation expense	Accumulated depreciation	Book value
2017	6000	6000	24000
2018	6000	12000	18000
2019	6000	18000	12000
2020	6000	24000	6000
Total	24000

d) Depreciation expense per unit = 24000/200000 = 0.12 per unit

e) Schedule : Unit of production

Year	Depreciation expense	Accumulated depreciation	Book value
2017	42000*.12 = 5040	5040	24960
2018	5760	10800	19200
2019	5880	16680	13320
2020	7320	24000	6000
Total	24000