On January 3, 2015, Jose Rojo, Inc. paid $224,000 for equipment used in manufacturing automotive supplies. In addition to the basic purchase price, the company paid $700 transportation charges, $100 insurance for the equipment while in transit, $12,100 sales tax, and $3,100 for a special platform on which to place the equipment in the plant. Jose Rojo, Inc. management estimates that the equipment will remain in service for five years and have a residual value of $20,000. The equipment will produce 50,000 units the first year, with annual production decreasing by 5,000 units during each of the next four years (i.e. 45,000 units in year 2; 40,000 units in year 3; and so on for a total of 200,000 units). In trying to decide which depreciation method to use, Jose Rojo, Inc. requested a depreciation schedule for each of the three depreciation methods (straight-line, units-of production, and double-declining-balance).
1. For each depreciation method, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. For the units-of production method, round depreciation per unit to three decimal places.
2. Show how Jose Rojo, Inc. would report equipment on the December 31, 2015, balance sheet for each depreciation method.