Question

On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $30,000. Residual value at the end of an estimated four-year service life is expected to be $2,000. The company expects the equipment to operate for 10,000 hours. The equipment operated for 2,200 and 3,000 hours in 2021 and 2022, respectively. Required: a. Calculate depreciation expense for 2021 and 2022 using straight-line method. b. Calculate depreciation expense for 2021 and 2022 using double-declining-balance method. c. Calculate depreciation expense for 2021 and 2022 using units-of-production using hours operated.

Answer 1

$7000

$7000

b. 15,000

7500

6160

8400

Step-by-step explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

(30,000 -- 20,000) / 4 = 7,000

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life)

2/4 x 30,000 = $15,000

2022 = 2/4 x (30,000 - 15,000) = 7500

Activity method based on hours worked = (hours worked that year / total hours of the machine) x (Cost of asset - Salvage value)