Question

# Perdue Company purchased equipment on April 1 for \$61,290. The equipment was expected to have a...

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 \$

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