Chapter 9

Using Excel

P9-42 Using Excel to prepare depreciation schedules

The Fraser River Corporation has purchased a new piece of factory equipment on January 1, 2018, and wishes to compare three depreciation methods: straight-line, double-declining-balance, and units-of-production.

The equipment costs $400,000 and has an estimated useful life of four years, or 8,000 machine hours. At the end of four years, the equipment is estimated to have a residual value of $20,000.

Requirements

1.

Use Excel to prepare depreciation schedules for straight-line, double-declining-balance, and units-of-production methods.

2.

Prepare a second depreciation schedule for double-declining-balance method, using the Excel function DDB. The DDB function cannot be used in the last year of the asset's useful life.

3.

At December 31, 2018, Fraser River is trying to determine if it should sell the factory equipment. Fraser River will only sell the factory equipment if the company earns a gain of at least $6,000. For each of the depreciation methods, what is the minimum amount that Fraser River will sell the factory equipment for in order to have a gain of $6,000?

Excel Skills

1.

Create formulas with absolute and relative cell references.

2.

Format the cells as accounting number format.

3.

Use the Excel function DDB to calculate double-declining-balance depreciation.

	Units of Production
	Year	Depreciation Per Unit	Machine Hours	Depreciation Expense	Accumulated Depreciation	Book Value
	1		2,400
	2		1,800
	3		2,480
	4		1,320
			8,000
	The minimum amount to sell the factory equipment in order to have a gain of $6,000 at the end of Year 1?