Question

Calculate the amount of depreciation to report during the year ended December 31 for equipment that was purchased at a cost of $56,000 on October 1. The equipment has an estimated residual value of $2,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses (a) straight-line, (b) double-declining-balance, or (c) units-of-production depreciation. (Do not round intermediate calculations.)

Answer 1

Depreciation for the equipment should be calculated using the straight-line, double-declining-balance, or units-of-production depreciation methods, resulting in $2,700, $5,600, or $2,700 respectively for the period from October 1 to December 31.

Step-by-step explanation:

The calculation of depreciation for the equipment involves determining the reduction in value over a given period using different methods of depreciation. Each method takes into account the cost of the equipment, its estimated residual value, and the useful life or usage of the equipment.

Straight-Line Depreciation

The straight-line method divides the depreciable base of the equipment, which is the original cost minus the residual value, evenly over its useful life. In this case:

Depreciable base = $56,000 - $2,000 = $54,000

Annual depreciation = $54,000 / 5 years = $10,800

Depreciation for Oct 1 to Dec 31 (3 months) = $10,800 * (3/12) = $2,700

Double-Declining-Balance Depreciation

For the double-declining-balance method, the depreciation rate is twice the straight-line rate and is applied to the book value of the asset at the beginning of the year. However, since the purchase was made during the year, only a fraction of the year's depreciation applies:

Straight-line rate = 1 / 5 years = 20%

Double-declining rate = 20% * 2 = 40%

Depreciation for Oct 1 to Dec 31 = $56,000 * 40% * (3/12) = $5,600

Units-of-Production Depreciation

The units-of-production method determines depreciation based on usage. The cost per unit of production is based on the total number of productive hours over the life of the asset:

Depreciation per hour = ($56,000 - $2,000) / 20,000 hours = $2.70 per hour

Depreciation for 1,000 hours used = $2.70 * 1,000 = $2,700

Answer 2

Instructions are listed below.

Step-by-step explanation:

Giving the following information:

Purchased at a cost of $56,000 on October 1. The equipment has an estimated residual value of $2,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment was used for 1,000 hours from October 1 to December 31

A) Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (56,000 - 2,000)/5= 10,800

Year 1= 10,800/12*3= $2,700

B) Annual depreciation= 2*[(original cost - residual value)/estimated life (years)]

Annual depreciation= 21,600

Year 1= 21,600/12*3= 5,400

C) Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced

Year 1= (54,000/20,000)*1000= $2,700