Question

Sushi corp. purchased and installed electronic payment equipment at its drive-in restaurants in san marcos, tx, at a cost of $51,300. the equipment has an estimated residual value of $2,700. the equipment is expected to process 275,000 payments over its three-year useful life. per year, expected payment transactions are 66,000, year 1; 151,250, year 2; and 57,750, year 3.

Required:
Complete a depreciation schedule for each of the alternative methods.

1. Straight-line.
2. Units-of-production.
3. Double-declining-balance.


Income Statement Balance Sheet
Year Depreciation Expense Cost Accumulated Depreciation Book Value
At acquisition
1
2
3

Answer 1

Sushi Corp.

Depreciation Schedule:

Income Statement Balance Sheet

Year Depreciation Expense Cost Accumulated Book Value

Depreciation

At acquisition $51,300

Straight-line method:

1 $16,200 $51,300 $16,200 $35,100

2 $16,200 $51,300 $32,400 $18,900

3 $16,200 $51,300 $48,600 $2,700

Units-of-production method:

1 $11,664 $51,300 $11,664 $39,636

2 $26,730 $51,300 $38,394 $12,906

3 $10,206 $51,300 $48,600 $2,700

Double-declining-balance method:

1 $34,371 $51,300 $34,371 $16,929

2 $11,342 $51,300 $45,713 $5,587

3 $2,887 $51,300 $48,600 $2,700

Step-by-step explanation:

a) Data and Calculations:

Cost of electronic payment equipment = $51,300

Residual value = $2,700

Depreciable amount = $48,600 ($51,300 - $2,700)

Volume of payments = 275,000

Useful life = 3 years

Year 1 expected payment transaction = 66,000

Year 2 expected payment transaction = 151,250

Year 3 expected payment transaction = 57,750

b) Straight-line method:

Depreciation expense per year = $16,200 ($48,600/3)

b) Units-of-production method:

Depreciation expense per:

Year 1 = 66,000/275,000 * $48,600 = $11,664

Year 2 = 151,250/275,000 * $48,600 = $26,730

Year 3 = 57,750/275,000 * $48,600 = $10,206

c) Double-declining-balance method:

Depreciation rate = 100/3 * 2 = 67%

Depreciation expense per:

Year 1 = $51,300 * 67% = $34,371

Year 2 = $16,929 * 67% = 11,342

Year 3 = $2,887 ($5,587 - $2,700)