Question

Perdue Company purchased equipment on April 1 for $61,290. The equipment was expected to have a useful life of three years, or 5,400 operating hours, and a residual value of $1,890. The equipment was used for 1,000 hours during Year 1, 1,900 hours in Year 2, 1,600 hours in Year 3, and 900 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 multiplier to four decimal places. Then 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

a.

Straight line: = ($61,290 - $1,890) / 3 = $19,800

Year	Amount
Year 1	$19,800
Year 2	$19,800
Year 3	$19,800
Year 4	$0

b.

Units of Output: ($61,290 - $1,890) / 5,400 = $11

Year	Hours	Cost per unit	Depreciation
Year 1	1000	$11.00	$11,000
Year 2	1900	$11.00	$20,900
Year 3	1600	$11.00	$17,600
Year 4	900	$11.00	$9,900

Year	Amount
Year 1	$11,000
Year 2	$20,900
Year 3	$17,600
Year 4	$9,900

c.

Double Declining rate = 100 X 2 / 3 = 66.6667%

Year	Balance at the beginning	Rate	Depreciation	Book value at the end
Year 1	$61,290	66.6667%	$40,860	$20,430
Year 2	$20,430	66.6667%	$13,620	$6,810
Year 3	$6,810	66.6667%	$4,540	$2,270
Year 4	$2,270	66.6667%	$1,513	$757

Year	Amount
Year 1	$40,860
Year 2	$13,620
Year 3	$4,540
Year 4	$1,513