Quick Producers acquired factory equipment on 1 Jan-uary 20X5, costing $ 78,000. In view of pending technological developments, it is estimated that the machine will have a resale value upon disposal in four years of $ 16,000 and that disposal costs will be $ 1,000. Quick has a fiscal year- end that ends on 31 December. Data relating to the equipment follow:
Estimated service life:
Years......... 4
Service- hours.... 20,000
Actual operations:
Calendar Year Service Hours
20X5........... 5,700
20X6........... 5,000
20X7........... 4,800
20X8........... 4,400

Round to the nearest dollar, and show computations.
1. Prepare a depreciation schedule for the asset, using
a. Straight- line depreciation.
b. Declining- balance depreciation, using a 40% rate.
c. Service- hours depreciation.
2. Express straight- line depreciation as a percentage of original cost.
3. Explain whether:
a. The rate of 40% was a good choice for declining- balance depreciation.
b. The 20,000 estimate of total service hours was accurate.

  • CreatedFebruary 17, 2015
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