PEI Productions Ltd. purchased equipment on February 1, 2015, for $50,000. The company estimated the equipment would have a useful life of three years and would produce 10,000 units, with a residual value of $10,000. During 2015, the equipment produced 4,000 units. On October 31, 2016, the machine was sold for $12,000; it had produced 5,000 units that year.

Instructions

(a) Record all the necessary entries for the years ended December 31, 2015 and 2016, for the following depreciation methods:

(1) Straight-line,

(2) Single-diminishing-balance,

(3) Units-of-production.

(b) Complete the following schedule for each method of depreciation and compare the total expense over the two-year period.

Transcribed Image Text:

Dimiishi Balance Units-of Production Straight-Line Depreciation expense 2015 2016 Total depreciation expense for two years +Loss (or- gain) on disposal = Net expense for two years