Blueprint Connection: Depreciation Methods Depreciation is the process of allocating the cost of an asset to expense over the asset's estimated useful life. The amount depreciated is the cost of the asset less the asset's expected residual value. An accelerated depreciation method allocates larger amounts of depreciation expense to earlier periods of an asset’s life and smaller amounts of depreciation expense to later periods of an asset’s life. Straight-line depreciation allocates an equal amount of the asset’s cost to depreciation expense for each year of the asset’s useful life. Units-of-production depreciation is used primarily to depreciate machinery and allocates costs based on the actual use of the machine to produce product. While these methods allocate a different amount of depreciation expense to each year of an asset’s life, the total amount of depreciation expense recognized over the asset’s life is the same under either method. Select the depreciation method that matches the depreciation formula. Depreciation Formula Depreciation Method (Cost - Residual Value) / Useful Life (1 / Useful Life) × 2 × Book Value (Cost - Residual Value) / Total Units of Production × Number of units produced in the period On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping and installation) of $86,000. The equipment is expected to have a useful life of four years or produce a total of 126,000 units. At the end of its life, the equipment is expected to have a residual value of $4,100. The equipment is expected to produce 22,680 units in 2014; 34,020 units in 2015; 32,760 units in 2016; and 36,540 units in 2017. Courier Inc.'s fiscal year ends on December 31. In the table below, fill in the missing depreciation expense and accumulated depreciation amounts using the straight-line, double-declining-balance, and units-of-production methods. Do not round your intermediate calculation. When required, round your answers to the nearest dollar. Cost $86,000 Depreciation Expense Accumulated Depreciation Year Straight-line Method Double- Declining- Balance Method Unit-of- Production Method Straight-line Method Double- Declining- Balance Method Unit-of- Production Method 2014 $43,000 $14,742 $20,475 $43,000 $14,742 2015 $20,475 $22,113 $64,500 $36,855 2016 $20,475 $10,750 $61,425 $58,149 2017 $20,475 $6,650 $23,751 $81,900 $81,900 As new or additional information becomes available, a company will need to recalculate its depreciation expense based on current estimates of useful life and/or residual value and revise current and future depreciation expense without restating previous financial statements.
Blueprint Connection:
Depreciation is the process of allocating the cost of an asset to expense over the asset's estimated useful life. The amount depreciated is the cost of the asset less the asset's expected residual value.
An accelerated depreciation method allocates larger amounts of depreciation expense to earlier periods of an asset’s life and smaller amounts of depreciation expense to later periods of an asset’s life. Straight-line depreciation allocates an equal amount of the asset’s cost to depreciation expense for each year of the asset’s useful life. Units-of-production depreciation is used primarily to depreciate machinery and allocates costs based on the actual use of the machine to produce product. While these methods allocate a different amount of depreciation expense to each year of an asset’s life, the total amount of depreciation expense recognized over the asset’s life is the same under either method.
Select the depreciation method that matches the depreciation formula.
| Depreciation Formula | Depreciation Method |
|---|---|
| (Cost - Residual Value) / Useful Life | |
| (1 / Useful Life) × 2 × Book Value | |
| (Cost - Residual Value) / Total Units of Production × Number of units produced in the period |
On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping and installation) of $86,000. The equipment is expected to have a useful life of four years or produce a total of 126,000 units. At the end of its life, the equipment is expected to have a residual value of $4,100. The equipment is expected to produce 22,680 units in 2014; 34,020 units in 2015; 32,760 units in 2016; and 36,540 units in 2017. Courier Inc.'s fiscal year ends on December 31.
In the table below, fill in the missing depreciation expense and
| Cost $86,000 |
Depreciation Expense |
Accumulated Depreciation |
||||
|---|---|---|---|---|---|---|
Year |
Straight-line Method |
Double- Declining- Balance Method |
Unit-of- Production Method |
Straight-line Method |
Double- Declining- Balance Method |
Unit-of- Production Method |
| 2014 | $43,000 | $14,742 | $20,475 | $43,000 | $14,742 | |
| 2015 | $20,475 | $22,113 | $64,500 | $36,855 | ||
| 2016 | $20,475 | $10,750 | $61,425 | $58,149 | ||
| 2017 | $20,475 | $6,650 | $23,751 | $81,900 | $81,900 |
As new or additional information becomes available, a company will need to recalculate its depreciation expense based on current estimates of useful life and/or residual value and revise current and future depreciation expense without restating previous financial statements.
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 4 images
