9 10 11 12 13 Problem No. 3 (15 points) On January 1, 2021, Gael LLC purchased the following equipment for use in its production process. Equipment: Equipment cost - $150,000 14 Estimated useful life - 4 years 15 16 17 (A) 18 19 20 21 22 (B) 23 Instructions Calculate the amount of depreciation expense that Gael LLC. should record for the Equipment purchase each year of its useful life under the following assumption. (1) Straight-line method of depreciation. (2) Double declining-balance method. The rate used is twice the straight-line rate. Which method used to calculate depreciation on equipment reports the lowest amount of depreciation expense in year 1 (2020)? The lowest amount in year 4 (2023)? 24 25 26 27 28 29 A (1) Straight Line Method: 30 333 31 32 33 Year Year Book Value at Estimated Beginning of Useful Life Annual Depreciation Accumulated Expense Depreciation Book Value at Ending of Year 34 2020 $ 150,000 4 $ 37,500 $ 37,500 $ 112,500 35 2021 150,000 4 37,500 75,000 75,000 36 2022 150,000 4 37,500 112,500 37,500 37 2023 150,000 4 37,500 150,000 38 39 40 41 A (2) Double Declining-balance method: 42 43 Book Value at Annual Book Value at 44 Beginning of Depreciation Accumulated Ending of 45 Year Year DDB Rate Expense Depreciation Year 46 2020 150,000 50% 75,000 75,000 75,000 47 2021 75,000 50% 37,500 112,500 37,500 48 2022 37,500 50% 18,750 131,250 18,750 49 50 51 4555555555 90723456 2023 18,750 50% 9,375 140,625 9,375 52 53 54 55 56 57 (B) Which method used to calculate depreciation on equipment reports the lowest amount of depreciation expense in year 1 (2020)? The lowest amount in year 4 (2023)? 58 59 60 Year 1 61 62 63