Question

At the beginning of 2017, your company buys a $34,400 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 4,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 41,000 units in 2017, 53,000 units in 2018, 45,000 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 = cost of equipment-salvage value

depreciable cost = 34400-4000 = 30400

b) Depreciation expenses = (cost-salvage value)/useful life

depreciation expenses = (34400-4000)/4 = 7600

c)
Years	Depreciation expenses	accumulated depreciation	net book value
Cost			34400
2017	7600	7600	26800
2018	7600	15200	19200
2019	7600	22800	11600
2020	7600	30400	4000

d) Depreciation expenses per unit = depreciable cost/expected unit production

depreciation expenses per unit = 30400/200000 = 0.152 units

e)
Years	Depreciation expenses	accumulated exp	net book value
Cost			34400
2017	6232	6232	28168
2018	8056	14288	20112
2019	6840	21128	13272
2020	9272	30400	4000