10 - 3A

PR 10-3A Depreciation by three methods; partial years OBJ. 2 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. Instructions 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. Year Year 1 Year 2 Year 3 Year 4 Totals Calculations: Straight-line method: For full year: (Cost For part years: Year 1 Depreciation x Portion of Year Year 4 Depreciation x Portion of Year Units-of-activity method: (Cost Year 1 Year 2 Year 3 Year 4 a. Straight- Line Residual Value) Year 1 Year 2 Year 3 Year 4 Residual Value) Double-declining-balance method: Depreciable Balance Rate Depreciation Expense 1 X X b. Units-of- Activity Years Depreciation Depreciation Total Hours Hours Rate C. Double-Declining- Balance Residual Value Yearly Depreciation Since depreciation cannot cause book value to fall below residual value: Depreciable Balance Rate Yearly Depreciation X Portion of Year = Yearly Depreciation Yearly Depreciation