Sunset Inc. purchased factory equipment on January 1, 2012, for$60,000. It is estimated that the equipment will have a $5,000salvage value at the end of its 5-year useful life. The equipmentis expected to operate for a total of 110,000 machine hours. During2012 it was operated for 8,000 machine hours and in 2013 it wasoperated for 13,800 machines hours.
Instructions
Calculate depreciation expense for 2012 and 2013 under thefollowing methods:
Straight-line
Double-declining
Activity method
Sunset Inc. purchased factory equipment on January 1, 2012, for$60,000. It is estimated that the equipment will have a $5,000salvage value at the end of its 5-year useful life. The equipmentis expected to operate for a total of 110,000 machine hours. During2012 it was operated for 8,000 machine hours and in 2013 it wasoperated for 13,800 machines hours.
Instructions
Calculate depreciation expense for 2012 and 2013 under thefollowing methods:
Straight-line
Double-declining
Activity method
Related questions
Depreciation Methods
The Gruman Company purchased a machine for $ 220,000 on January2, 2013. It made the following estimates:
| Service life | 5 years or 10,000 hours |
| Production | 200,000 units |
| Residual value | $ 20,000 |
In 2013, Gruman uses the machine for 1,800 hours and produces44,000 units. In 2014, Gruman uses the machine for 1,500 hours andproduces 35,000 units. If required, round your final answer to thenearest dollar.
Required:
Depreciation expense
Compute the depreciation for 2013 and 2014 under each of thefollowing methods:
| 2013 | $ |
| 2014 | $ |
| 2013 | $ |
| 2014 | $ |
Straight-line method
| 2013 | $ |
| 2014 | $ |
Sum-of-the-years'-digits method
| 2013 | $ |
| 2014 | $ |
Double-declining-balance method
| 2013 | $ |
| 2014 | $ |
Activity method based on hours worked
Activity method based on units of output
For each method, what is the book value of the machine at theend of 2013? At the end of 2014?
| 2013 | $ |
| 2014 | $ |
| 2013 | $ |
| 2014 | $ |
Straight-line method
| 2013 | $ |
| 2014 | $ |
Sum-of-the-years'-digits method
| 2013 | $ |
| 2014 | $ |
Double-declining-balance method
| 2013 | $ |
| 2014 | $ |
Activity method based on hours worked
Activity method based on units of output
If Gruman used a service life of 8 years or 15,000 hours and aresidual value of $10,000, what would be the effect on thefollowing under the straight-line, sum-of-the-years'-digits, anddouble-declining-balance depreciation methods?Straight-linemethod
| 2013 | $ |
| 2014 | $ |
Sum-of-the-years'-digits method
| 2013 | $ |
| 2014 | $ |
Double-declining-balance method
| 2013 | $ |
| 2014 | $ |
Book value
Straight-line method
| 2013 | $ |
| 2014 | $ |
Sum-of-the-years'-digits method
| 2013 | $ |
| 2014 | $ |
Double-declining-balance method
| 2013 | $ |
| 2014 | $ |
Comparing Three Depreciation Methods
Waldum Company purchased packaging equipment on January 5, 2012,for $135,000. The equipment was expected to have a useful life ofthree years, or 18,000 operating hours, and a residual value of$13,500. The equipment was used for 8,600 hours during 2012, 5,300hours in 2013, and 4,100 hours in 2014.
Required:
1. Determine the amount of depreciation expensefor the years ended December 31, 2012, 2013, and 2014, by (a) thestraight-line method, (b) units-of-output method, and (c) thedouble-declining-balance method. Also determine the totaldepreciation expense for the three years by each method.
Note: FOR DECLINING BALANCE ONLY, round the multiplier to fourdecimal places. Then round the answer for each year to the nearestwhole dollar.
| DepreciationExpense | ||||||
|---|---|---|---|---|---|---|
| Year | Straight-LineMethod | Units-of-OutputMethod | Double-Declining-BalanceMethod | |||
| 2012 | $ | $ | $ | |||
| 2013 | $ | $ | $ | |||
| 2014 | $ | $ | $ | |||
| Total | $ | $ | $ | |||
