An equipment was purchased at a cost of $33,400 on September 1, 2010. The equipment has an estimated residual value of $2,790 and an estimated useful life of five years or 20,200 hours. Assume the equipment was used for 1,080 hours from September 1 to December 31.

An equipment was purchased at a cost of $33,400 on September 1, 2010. The equipment has an estimated residual value of $2,790 and an estimated useful life of five years or 20,200 hours. Assume the equipment was used for 1,080 hours from September 1 to December 31.

 

Required:

Calculate the amount of depreciation to report during the year ended December 31, using following methods(Round your answers to the nearest dollar amount. Omit the "$" sign in your response):

Straight-line	$
Double-declining-balance	$
Units-of-production	$

 

Explanation:

Annual straight-line depreciation	=	(Cost – Residual Value) x 1/Useful Life
	=	($33,400 – $2,790) x 1/5 years
	=	$6,122 per year

 

September 1 - December 31 = 4 months, so depreciation is $6,122 x 4/12 = $2,041.

 

Double-declining-balance	=	(Cost – Accumulated Depreciation) x 2/Useful Life
Year 1 Depreciation	=	($33,400 – $0) x 2/5
	=	$13,360 for the year

 

September 1 - December 31 = 4 months, so depreciation is $13,360 x 4/12 = $4,453.

 

Units-of-production	=	(Cost – Residual Value) x Actual /Estimated Total Production
		($33,400 – $2,790) x 1,080/20,200 = $1,637.

Because the actual production is based on four months, we do not need to scale-down the $1,637 calculated depreciation. It already represents four months of depreciation.