Depreciation by Three Methods; Partial YearsPerdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 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) the units-of-activity method, and (c) the double-declining-balance method.FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then, round the answer for each year to the nearest whole dollar.

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Asked Oct 3, 2019
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Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 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) the units-of-activity method, and (c) the double-declining-balance method.

FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then, round the answer for each year to the nearest whole dollar.

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Expert Answer

Step 1

Depreciation means decline in the estimation of benefit inside its valuable life because of mileage of asset or the asset ends up outdated. Depreciation doesn't include money exchange rather it demonstrates how much the benefit worth has been utilized over a period.

 

Step 2

Part a.

Depreciation using straight line method:

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Annualdepreciation=Costof the asset-Scrap value Useful life of the asset 3 years Useful life Annual depreciation ((270,000- 9,000) 3) $87,000 Book value at Book value at Depreciation (S) the beginning (S) 270,000 65,250 (9 months) Year the end (S) Year 204,750 117,750 30,750 9.000 87,000 87,000 year 2 204,750 117,750 30,750 21,750 (3 months) year 3 year 4

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Step 3

Part b:

Depreciation using units...

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Rate of depreciation=Cost of the asset-Scrap value Total operating hours Rate of depreciation ((270,000 - 9,000) 18,000) 14.5 per hour Book value at Rate of depreciation depreciation (S)at the end (S) Number Annual Book value the beginning (S) Year of hours Year 270,000 7,500 14.5 108,750.00 79,750.00 58,000.00 14,500.00 161,250 year 2 year 3 161,250 81,500 23,500 5,500 4,000 1,000 14.5 81,500 23,500 9,000 14.5 14.5 year 4

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