Question

Wonder Fried Chicken bought equipment on January 2, 2024, for $27,000. The equipment was expected to remain in service for four years and to operate for 4,200 hours. At the end of the equipment's useful life, Wonder estimates that its residual value will be $6,000. The equipment operated for 420 hours the first year, 1,260 hours the second year, 1,680 hours the third year, and 840 hours the fourth year. Read the requirements. Requirements 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. 2. Which method tracks the wear and tear on the equipment most closely? Print Date 1-2-2024 12-31-2024 12-31-2025 12-31-2026 12-31-2027 Requirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods: straight-line, units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. Begin by preparing a depreciation schedule using the straight-line method. Straight-Line Depreciation Schedule Asset Depreciable Cost Cost Done 27,000 Depreciation for the Year Useful Life + + + = = - X = Depreciation Accumulated Book Expense Depreciation Value Clear all Chook ander

Answer 1

Depreciation Schedule:

Straight-Line Method:

| Year | Depreciation Expense | Accumulated Depreciation | Book Value |

| 2024 | $5,250 | $5,250 | $21,750 |

| 2025 | $5,250 | $10,500 | $16,500 |

| 2026 | $5,250 | $15,750 | $11,250 |

| 2027 | $5,250 | $21,000 | $6,000 |

Units-of-Production Method:

| Year | Depreciation Expense | Accumulated Depreciation | Book Value |

| 2024 | $4,285 | $4,285 | $22,715 |

| 2025 | $12,856 | $17,141 | $9,144 |

| 2026 | $17,141 | $34,282 | $4,858 |

| 2027 | $8,570 | $42,852 | $0 |

Double-Declining-Balance Method:

| Year | Depreciation Expense | Accumulated Depreciation | Book Value |

| 2024 | $10,800 | $10,800 | $16,200 |

| 2025 | $8,640 | $19,440 | $10,560 |

| 2026 | $6,912 | $26,352 | $6,888 |

| 2027 | $4,800 | $31,152 | $4,800 |

Step-by-step explanation:

1. Straight-Line Method: It distributes the depreciable cost evenly over the asset's useful life. Each year, the depreciation expense remains constant at $5,250, reducing the book value gradually until reaching the residual value.

2. Units-of-Production Method: This method allocates depreciation based on the equipment's usage. Higher hours lead to higher annual depreciation. Consequently, the asset's value decreases more rapidly with increased usage.

3. Double-Declining-Balance Method: This accelerates depreciation. The rate is double that of the straight-line method applied to the remaining book value. In the initial years, depreciation is higher, reducing the book value faster.

Method Closest to Wear and Tear: The units-of-production method closely tracks wear and tear since it allocates depreciation according to the actual usage of the equipment. This method accurately reflects the impact of operational hours on the asset's value.